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

An Employer’s Guide to Adoption Benefits and Parental Leave

More families are growing through alternative family building methods like adoption or surrogacy. Having a plan to support those families will benefit you and your employees. It’s also an important, concrete celebration of adoption in our society.

Whether you’re looking to create a more adoption-friendly workplace or an employee has approached you about adoption benefits, you may be unsure how to implement benefits for employees who are adoptive parents.

Below, we’ll walk you through:

If you’re a hopeful adoptive family or prospective birth mother looking for more information about the adoption process and other adoption benefits, you can call us today at 1-800-ADOPTION to speak with an adoption professional now.

Understanding Adoption Leave [How it Differs from Standard Parental Leave]

The Family Medical Leave Act requires all public agencies and all private companies with 50 or more employees to provide 12 weeks of unpaid parental leave. That leave does include parents who adopt a child.

Unpaid parental leave begins when the legal finalization of the adoption occurs, but does not cover the time away new adoptive parents must spend traveling or receiving placement of their child.

Finalization often takes place several months after a child is placed with an adoptive family, which means the important period of bonding with a newly adopted child will occur before the adoption is legally finalized and before adoptive parents are eligible for FMLA leave.

For that reason, an adoption-friendly employer must provide paid leave for periods of absence related to the adoption, like necessary trips during the process and bonding time immediately after placement. This would be equivalent to the time biological parents would generally spend recovering from childbirth and bonding with their newborn.

Parental leave is one of the most crucial benefits employers can provide to adoptive parents.

While, in many respects, the parental leave policy for adoptive parents would look very similar to that provided to biological parents, there are a few exceptions to consider. With that in mind, what should you consider including in your adoption leave policy?

Voluntary, employer-funded policies for employees who adopt most commonly include:

  • Financial reimbursement for some or all adoption costs

  • Paid leave during necessary trips to complete an adoption, as well as post-placement parental leave

  • Phased leave before and after placement to help parents and children readjust to a work schedule

  • Additional unpaid leave on top of the FMLA-required 12 weeks (commonly between a week and a year)

Many companies cover more or less — it’ll be up to you to decide what’s appropriate for your policy. Leave is also only one of many adoption benefits employers can offer. We’ll outline more of those options later.

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:

  • Improve loyalty and retention for your existing employees

  • Attract new employees

  • Prove you’re a family-friendly, inclusivity-minded company

  • Publicly promote your equal support for biological and adoptive parents

  • Allow employees the necessary amount of time to bond with new children

  • Make adoption a more affordable and accessible path for everyone

  • Encourage other companies to follow suit in an effort to compete with your benefits package

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:

  • Application fees

  • Medical expenses

  • Transportation and living expenses

  • Agency costs

  • Home study costs

  • Attorney fees

  • Post-adoption services and counseling

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.

Adoption-related taxes are often complex. Here is how you can help your employees navigate these adoption-related taxes:

  • The financial adoption assistance amount that you provide should be reported in box 12 of the employee’s W-2 using code “T” to identify the correct amount withheld

  • Employees should refer to the current IRS Adoption Credit and Adoption Assistance Programs, regarding income exclusions and tax credits for qualified adoption expenses

  • Adoption assistance programs should allow employees to exclude from taxable income expenses paid or reimbursed by their employers on their behalf for qualifying adoption expenses

  • The employee may utilize the adoption tax credit and the income exclusion, but the maximum cap can’t be exceeded

  • The employee is permitted to use both the adoption credit and income exclusion for their adoption, but it can’t be used for the same expenses within the adoption

  • The employee can use the adoption tax credit for any expenses you don’t reimburse

  • Recommend to your employee that they consult a personal tax advisor, or refer them to a tax advisor within your company to help with adoption-related taxes

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.

Also, consider these company-wide measures:

  • Include adoption in your employee assistance program

  • Maintain a list of adoption networks or support groups to provide your employees

  • Educate employees about adoption with workshops, reading materials, or speakers

  • Understand that adoptive parents may need a flexible work schedule to address pre-and post-adoption requirements and challenges

  • Celebrate when employees adopt, just as you would when employees give birth

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.

What Other Companies Provide Benefits for “Non-Traditional” Families?

According to Aon Hewitt’s 2019 survey of over 200 U.S. companies, only 20% offered a financial adoption benefit. But, there is a serious and growing demand for adoption benefits in the workplace as more families continue to grow through non-biological methods.

In addition to the want for more adoption benefits, there are many emerging expectations employees have for employers that they did not have in the past, such as:

  • More flexible work hours

  • Work/life balance support

  • Clear approach to employee mental health

  • More agile home/work options

  • High degree of benefits personalization

Industry standards are always changing, and for your company to stay relevant and keep up with competitors, you’ll need to offer competitive benefits packages. As more businesses follow suit, pressure to include these benefits will increase.

When developing your own adoption benefit policies, it can be helpful to look to the corporations who have done it well as a point of comparison. The Dave Thomas Foundation for Adoption does an annual survey of workplaces across the U.S. Some of the largest companies and most recognizable names that made the 2021 list for the 100 Best Adoption-Friendly Workplaces include:

  • NVIDIA

  • American Express

  • Capital One

  • Sony Music Entertainment

  • Hasbro, Inc.

  • Microsoft Corporation

  • Fidelity Investments

However, small and mid-sized companies are also including adoption-friendly policies in their family benefits packages at a rapidly increasing rate and are often recognized on that list.

***

If you have more questions about the adoption process and other adoption benefits you can implement in and out of the workplace, you can call us today at 1-800-ADOPTION or fill out our free online contact form to speak with an adoption professional now.

Disclaimer
Information available through these links is the sole property of the companies and organizations listed therein. America Adoptions, Inc. provides this information as a courtesy and is in no way responsible for its content or accuracy.

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Frequently Asked Questions

Do we need to retain our own attorney?

No, American Adoptions has established relationships with some of the best adoption attorneys in the nation. Because adoption laws vary from state to state and between counties, it is important to utilize the services of an adoption attorney who specializes in the state where the adoption will finalize, which is unknown until you match with an expectant mother. You have the right to retain your own attorney, but doing so may be an additional, unnecessary expense.

Can we choose the gender of our baby?

American Adoptions does not allow gender specificity in adoption. Any family who wishes to be gender-specific in their adoption should contact us at 1-800-ADOPTION and ask about the possibility of an exception waiver before taking any other steps toward adoption with our agency. Any families who do receive an exception to be gender-specific may also incur an additional fee, which helps cover the additional advertising costs of such a request.

Please note that gender specificity will likely increase your wait time significantly.

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