How (And Why) to Offer Adoption Benefits to Your Employees

Why Should You Offer Adoption Benefits?

At its most simplistic motivation, employers who provide adoption benefits do so because they care about their employees’ families and the children who need to be adopted. They see the provision of adoption benefits as “the right thing to do.”

Once you enact this change, you should see a noticeable difference in and around the company that will:

It is a relatively low-cost benefit to offer, as only about 0.1% of employees are estimated to use adoption benefits when they are made available (according to Adoption Nation by Adam Pertman)

Companies that do not acknowledge the additional time and finances that go into an adoption will alienate current and future employees.

Families created through adoption and by biology are, and should be, viewed as equal in many respects (including the love within that family). But, adoptive families must be granted the additional help that biological families don’t require.

More and more companies are creating adoption-friendly policies and other work-life policies. Those who don’t will lose out to competitors with better benefits packages.

How You Can Implement Adoption Benefits in Your Workplace

As we previously noted, there are going to be a number of decisions you’ll need to make about what you want to cover when creating your own adoption benefit policies.

At the same time, there will be a few federal guidelines you’ll want to reference and adhere to. We’ll help you break it all down.

Any employer implementing adoption benefits should start by creating an adoption assistance program.

This is an employer’s written plan for the benefit of its employees. These are voluntary and not legally required for employers.

The Dave Thomas Foundation for Adoption has a helpful sample policy you can use and adapt for your purposes.

The adoption-friendly workplace employer toolkit includes a sample news release to inform everyone in and outside of your workplace that you’ll be providing adoption benefits, as well as what those benefits include.

Below are several aspects of the average adoption benefits policy you can implement — examined in greater depth:

1. Financial Assistance and Reimbursements

Most adoption assistance programs help with the “reasonable and necessary expenses directly related to the adoption of a child.” You may choose to:

• Reimburse your employee for the full amount of some or all of these expenses

• Cover a percentage of the totals

• Cap reimbursement amounts at a reasonable figure

Reasonable and necessary expenses are typically considered to include:

Employer adoption reimbursement usually ranges from $7,500 to unlimited (average is $9,300) per adoption. You may choose to offer a higher reimbursement for employees for “special needs adoptions,” which take a greater long-term financial toll on the adoptive parents.

While some companies only allow employees to apply for reimbursement once the child has been placed in their home, it usually takes at least six months after placement for an adoption to be legally finalized.

Most adoption expenses are incurred before the last step of finalization, so post-placement reimbursement is not very helpful to the employee.

Because of the time-intensive nature of adoption, offering stages of reimbursement before the child is actually placed with the parents is recommended. This helps offset the large up-front, out-of-pocket costs that adoptive parents generally face.

The Dave Thomas Foundation for Adoption offers this helpful example:

A $5,000 total reimbursement package might be offered as:

• Up to $1,000 reimbursement once the adoption application is completed and filed with an agency.

• Up to $1,000 reimbursement when the home study stage is completed.

• Up to $3,000 reimbursement once the child is placed in the home.

2. Taxes

The IRS Employer’s Tax Guide to Fringe Benefits states that adoption reimbursements by the employer are not subject to federal income tax. But, they are subject to:

• Social Security

• Medicare

• Federal unemployment taxation

As an employer, you can fully deduct the qualified adoption expenses you cover in your adoption assistance program as reasonable and necessary business expenses.

There is no special tax incentive for an employer regarding adoption assistance programs.

3. Parental Leave Policies for Adoptive Parents

Here are some questions to ask yourself when determining leave policies for adoptive parents:

• What is the procedure for requesting leaves of absence? Adoption opportunities often occur with little to no warning, so employers and supervisors should try to take this into consideration.

• Will I stick with the FMLA policy of any eligible employee receiving up to 12 weeks of unpaid leave each year for the placement of a child via adoption or foster care? Or, will I offer additional unpaid leave time (ranging from one week to one year) beyond the FMLA requirement?

• Will I follow an existing maternity leave policy to establish a paid leave for adoption placement?

• How much paid (or partially paid) leave will my employee receive? For reference, most employers give two to 26 weeks (average is 7 weeks), which can be used pre- or post-adoption and is applied to leave under FMLA.

• What happens to employee benefits while they’re on leave? The FMLA requires benefits to be maintained for the mandatory 12-week leave period. Most companies require employees who plan to be out longer than the required 12-week leave period to make arrangements with Human Resources for the continuation of benefits.

• The FMLA mandates that an employee’s position must be retained during their minimum of 12-week leave, but in my policy, how much additional leave can an employee take and still maintain their job, if any?

• Does the adoptive parent have to return to work full-time immediately, or will I allow employees who take extended leave the option to return on a part-time or phased-in basis?

During Family Medical Leave, employees will continue to receive regular benefits related to the date of hire. What you choose to cover beyond that is up to you.

4. Eligibility for Adoption-benefit Policies

Some eligibility requirements for your employees are state or federally mandated while others will be up to you.

In most cases, adoption benefits eligibility may be the same as (or very similar to) maternity/family benefits.

In order for your employee to be eligible to receive reimbursements, you’ll need to decide what procedure they should follow in applying for benefits, as well as what expenses they should document.

Most companies consider full- and part-time employees to be eligible for adoption benefits.

Depending on the company, an employee’s access to adoption benefits may become effective immediately upon hire or may be effective after one year of employment.

You will need to decide whether an employee is retroactively eligible to receive full, partial or zero adoption benefits if they adopted last year or are currently in the process of adopting.

Additionally, an employer typically covers most of the different types of adoption. But, many choose to exclude stepparent adoptions because those adoptions don’t require leaves of absence and are far less expensive than other types of adoption

However, a same-sex parent who is completing a second-parent adoption is considered eligible because this is an additional step required in some states in order for same-sex couples to adopt a child.

Most companies also choose to cover kinship adoptions or relative adoptions, because the adopting parent generally needs additional time to help their new child adjust to the change in permanent caretaker.

5. An Adoption-friendly Atmosphere

Familiarizing yourself with the needs of birth parents, adoptive parents and adoptees can help you appropriately provide for their basic necessities.

For example, you may have a prospective birth mother on staff who is planning to place her child for adoption.

Even though she won’t be parenting her child, she will still need time to physically and emotionally recover after the birth, so you should consider her eligible for maternity benefits under the FMLA.

Workplaces throughout the world are finally beginning to address the need for more inclusive benefits packages, including policies for those who will create a family through adoption.

We applaud all employers who are taking steps to implement these adoption-friendly benefits and policies within their own workplace.