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Eastern Bank CEO Explains Company’s Opposition To DOMA

BOSTON — Some of the biggest names in the Massachusetts business community have signed on to a legal brief asking the U.S. Supreme Court to overturn the federal Defense of Marriage Act. Akamai Technologies, Biogen Idec, Blue Cross Blue Shield, Bright Horizons, FitCorp, National Grid, New Balance and Partners HealthCare are just a few of the 34 to sign the brief.

DOMA denies federal benefits to same-sex couples who are legally married in their states, and many companies say that requires them to discriminate against some of their employees. Another Massachusetts business that has signed the legal brief is Eastern Bank, whose CEO, Richard Holbrook, spoke with WBUR’s All Things Considered host Sacha Pfeiffer about that decision.

Sacha Pfeiffer: One major argument of the businesses opposing DOMA is that it saddles them with unnecessary costs and administrative complexity. Could you give us an example, or some examples, of how that has played out at Eastern Bank?

Richard Holbrook: Certainly. We have an obligation, as does any employer, to withhold taxes on our employees’ earned income, and for people who are considered married under the federal law, their benefits that we provide to them — health benefits, for example — are not considered taxable.

These are heterosexual married couples?

“The administrative burden is not really the issue. It’s more, for us, a question of fairness.”
– Eastern Bank CEO Richard Holbrook

That’s correct, opposite-sex married couples. But for same-sex married couples who are legally married here in Massachusetts, the problem is that they’re not considered married under the federal law, under DOMA. And therefore we have to pull their benefits out of our normal processing system and actually attribute federal income to them on the benefit that they receive. It’s a second stream of processing that has to take place and requires us to keep track of them individually on that basis.

Does this play out with some employee benefits as well as with the taxing system?

It does in some respects, because things such as beneficiaries under life insurance policies, under deferred compensation arrangements, or anything else that might involve federal income all have to be taken care of and thought of separately. But I will tell you that the administrative burden is not really the issue. It’s more, for us, a question of fairness.

Fairness in terms of how you treat your employees?

Absolutely. You know, we have had a long and excellent relationship with the LGBT community, so we’ve had a heightened sensitivity to issues that concern that community for some time. We first understood some of these issues in early 2011, when Bob Rivers, our president, and I learned that our employees who were legally married in Massachusetts would have to pay income taxes on those family health benefits that our opposite-sex married employees did not have to pay,

And that’s because the federal government considers health benefits taxable income if you’re in a same-sex relationship but non-taxable income if you’re in an opposite-sex relationship.

That is correct. And we thought that was unfair. So we, at that point in time, put in a policy to reimburse our same-sex married couples for their tax burden, and we actually provide them with a $2,500 stipend per couple a year to sort of offset the tax burden that they would otherwise bear because of DOMA.

Eastern Bank was actually the first company to sign this brief. When you did this, did you feel like you were making a statement?

We did.

And what would you say that statement is?

That even a bank can have a conscience and understand what’s right. Banks don’t always get credit for that.

The legal brief also has this interesting line that says, “DOMA does violence to the morale of the institution itself.” The idea that employees’ morale — if they are same-sex couples who are treated differently in terms of benefits and taxes — that morale can decline. Would you say you’ve experienced that at Eastern Bank?

Well, I would say we could have. The way I can, I guess, best demonstrate that is when we made our announcement that we were going to, in fact, provide our same-sex married couples with a reimbursement for their tax burden on their health benefits, the rest of the organization applauded. So if we can raise morale by doing something of that nature, I assume that morale is weakened by the fact that we are forced to discriminate.

You’ve said that, for you, the administrative costs and administrative complexity isn’t the largest issue. However, how much extra time and work would you say that DOMA has created for your company?

It is relatively modest. There are a few people in our human resource division that have to keep separate records and books on this. We actually have a very small number of these employees and so we’ve been able to work one-on-one. But in terms of overall cost, it’s not major. There is a burden, but it pales by comparison with the social justice issues that are involved here.

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  • disqus_jvdl6aUivY

    Thanks you Mr. Holbrooke and WBUR! This was an excellent interview and one of the clearest, strongest examples of ethical business leadership I’ve heard in a long time. I’ve recently taken out an auto loan from Eastern and now feel proud of the institution of which I am now serendipitously a part. Equity for one is equity for all.

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