Overview of Employer-Provided Adoption Benefits

Inside

*Motivation for Employers
*Types of Benefits
*Employer Listing
*Tax Benefits

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Almost all employers offer benefits to new biological parents. A growing number of employers also offer benefits to adoptive parents. A 1990 survey by Hewitt Associates found that 12 percent of employers surveyed offered some kind of adoption benefits; by 1995, the proportion had climbed to 23 percent. In 2000, Hewitt found that nearly one-third (32 percent) of 1,020 employers surveyed offered adoption benefits.

Motivation for Employers

What motivates employers to provide adoption-related benefits? Most companies that offer adoption benefits do so for the following reasons:

Equity. By treating employees who adopt on par with employees who become parents through birth, companies promote a fair and nondiscriminatory workplace.

Productivity. By helping employees to cope with the logistical and financial challenges of adopting, employers help employees stay productive during the adoption process.

Recruitment and Retention. By offering adoption benefits, companies enhance their reputation as good places to work and build loyalty among employees. Strategies that help lower turnover are considered good for a company's bottom line.

Good Will. By offering adoption benefits, companies can generate positive publicity.

Social Contribution. By providing adoption benefits, companies act on a desire to support the well-being of children and families.

Whatever the motivation, employer-sponsored adoption benefits take many forms. Most are not offered as separate "adoption" benefits packages, but instead are incorporated into general employment benefits or an employer-sponsored health plan.

Eligibility for adoption benefits usually depends on employment status (for example, policies frequently specify that permanent employees are eligible while temporary employees are not). Employers also might tie eligibility to length of employment or participation in a company-sponsored health plan.

The type of adoption also can affect the benefits offered. For example, some employers do not provide benefits when a stepparent adopts his or her stepchild or stepchildren. Some employers specify that the child being adopted cannot be older than 16 or 18. And, some employers offer enhanced benefits for the adoption of a child with special needs.

Types of Benefits

Typically, adoption benefits mirror benefits available to new biological parents. Adoption benefits fall into three general categories:

*Information resources
*Financial assistance
*Parental leave policies.

Employers may offer one or more of these types of benefits during a single adoption.

Information resources. Resources made available to employees may include referrals to licensed adoption agencies, support groups and organizations; access to an adoption specialist to answer questions about the process; and the management of special situations, such as a special needs adoption. Many employers that offer this type of benefit contract with a human resources consulting firm to provide these services to employees.

Financial assistance. Financial benefits take different forms. Some employers provide a lump sum payment for an adoption, usually between $2,000 to $10,000. Other employers pay certain fees related to an adoption. Still others partially reimburse employees for expenses. Typical reimbursement plans cover 80 percent of certain itemized expenses up to an established ceiling (about $4,000 on average). Some employers reimburse at a higher rate for adoptions of children with special needs.

Most frequently, employer-provided financial assistance covers public or private agency fees, court costs, and legal fees. Employers also might help with foreign adoption fees, medical costs, temporary foster care charges, transportation costs, pregnancy costs for a birth mother, and counseling fees associated with placement and transition.

Some employers pay benefits per adoption, while others pay per child adopted. In most cases, the benefits are paid after the adoption is finalized, although some employers may pay benefits earlier, when the child is placed or as the expenses are incurred.

Parental leave. Federal law requires employers with 50 or more employees (including the Federal government and Congress) to offer both mothers and fathers up to 12 weeks of unpaid leave upon the birth or adoption of a child. The law ensures that employees can return to their current jobs or an equivalent position and requires employers to continue the employee's health benefits during the leave period.

Some employers allow employees to take more than 12 weeks leave: Spans might stretch to 6 months or 1 year. Some employers allow employees to combine accumulated paid leave (such as vacation leave) with unpaid leave to extend their total leave. Some employers allow employees to use accumulated sick time as paid parental leave after an adoption. And finally, some employers offer some amount of paid leave for employees who adopt a child.

Some employers classify parental leave for adoptive parents as child care leave and others as personal hardship leave, medical leave, authorized time off, discretionary time, annual or paid personal leave, or annual or all-purpose time. Most employers specify a maximum amount of paid leave that can be taken. Public and private union contracts often have provisions for adoption leave.

Many States require employers to offer parental leave to adoptive parents. To find out about a particular State, contact the State's Adoption Specialist. (Call NAIC for contact information or check NAIC's National Adoption Directory online at http://naic.acf.hhs.gov/database/index.htm#nad.)

Employer Listing

A list of employers offering adoption benefits was prepared by the Adoption-Friendly Workplace Program operated by the National Adoption Center (NAC) in collaboration with the Dave Thomas Foundation for Adoption and supported through a grant from the W.K. Kellogg Foundation. The program promotes adoption benefits and provides information to employers and employees. NAC maintains and regularly updates the list on their Web site at http://www.adoptionfriendlyworkplace.org/employers.asp. For more information, contact the Adoption-Friendly Workplace Program at 877-777-4222.

Employer Adoption Benefits Tool Kits

The National Adoption Center (NAC) and the Dave Thomas Foundation for Adoption have partnered on the Adoption-Friendly Workplace program to encourage employers to offer adoption benefits. The partnership provides the following free tool kits:

Stand in Good Company - Offer Adoption Benefits
This packet of information provides comprehensive information to help employers develop or enhance their adoption benefits programs.

Convincing Your Organization to Offer Adoption Benefits
This tool kit provides step-by-step information to help employees advocate effectively for adoption benefits in their workplace.

To obtain copies, contact NAC at 877-777-4222 or info@AdoptionFriendlyWorkplace.org.

Tax Benefits

Federal law provides certain tax benefits to families who adopt, including an income tax credit for adoption expenses and a tax exclusion for employer-paid adoption assistance. These benefits originally took effect in 1997; they were expanded by Congress and made permanent in a tax bill signed by President Bush on June 7, 2001 (P.L. 107-16). (To read or download the new law, visit Thomas, the legislative service of the Library of Congress at http://thomas.loc.gov.)

For tax years starting on or after January 1, 2002,, taxpayers are allowed a $10,000 tax credit per eligible child, including a child with special needs, toward qualified adoption expenses paid or incurred. (A child of a taxpayer's spouse would not be eligible.) For tax years starting on or after January 1, 2003, the tax credit is available for a special needs adoption regardless of whether qualified expenses are incurred.

Also beginning with the 2002 tax year, employees can exclude from their income employer-paid, qualified expenses up to $10,000 for the adoption of a child. Starting with the 2003 tax year, for the adoption of a child with special needs, the $10,000 exclusion applies regardless of whether the taxpayer has qualified adoption expenses.

It is up to States to define children's eligibility as having "special needs." Usually the special needs designation is applied to children who are older, from a minority background, need to be placed with siblings, or have a physical or mental disability. Children must be citizens or residents of the United States to qualify as having special needs.

The credit and the exclusion will phase out as income rises; under the new law, the starting point for the phase-out rises from $75,000 to $150,000 of modified adjusted gross income.

The new law also provides for the credit and exclusion to adjust according to inflation beginning in 2003. And, the law permanently allows the tax credit against the alternative minimum tax.

Provisions enacted in 1997 continue to apply to adoption expenses incurred between January 1, 1997 and December 31, 2001. For those tax years, parents are allowed to take a $5,000 income tax credit per child adopted. The credit rises to $6,000 for a domestic special needs adoption. The provisions allow taxpayers to exclude up to $5,000 ($6,000 for special needs) of employer-provided adoption assistance.

Items that generally fall into the category of qualified expenses include adoption fees, court costs, attorney fees, and other expenses directly or primarily related to the legal adoption of an eligible child. Other expenses that are allowed for special needs adoption are "all reasonable and necessary expenses required by a state as a condition of adoption," such as housing renovations or purchases specifically required to meet the needs of the child.

Taxpayers can claim both a credit and an exclusion in connection with the same adoption, but may not claim the same expenses twice. Similarly, if taxpayers have already been reimbursed for adoption expenses through a Federal, State, or local government program, those reimbursed expenses are not eligible for the Federal tax credit.

Some States offer adoption tax benefits as well. Contact your State's Treasury Department for information.

Guidance on Adoption Tax Benefits

This fact sheet provides highlights of the current and expanded tax benefits available to adoptive families, but the information should not be relied upon as legal advice. For specific questions, call the IRS at 800-829-1040 or consult with a tax professional. The IRS is expected to release guidance on the expanded adoption benefits by the end of 2001. Meanwhile, IRS Publication 968, "Tax Benefits for Adoption," addresses the 1997 provisions and provides a helpful model for the expanded benefits. NAIC has free copies of Publication 968 available. Call or e-mail the Clearinghouse to request a copy. Or, visit the IRS Web site at http://www.irs.gov to download a copy.

This material may be reproduced and distributed without permission, however, appropriate citation must be given to the National Adoption Information Clearinghouse.

Credits: Child Welfare Information Gateway (http://www.childwelfare.gov)