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Adoption benefits are a great way for employers to get a lot of "bang for their buck," benefit consultants and employers say.

While the cost to the employer is low because only a relatively tiny percentage of employees are likely to use the benefits, just knowing their employer offers adoption benefits gives all employees a morale boost, observers say.

"I can't tell you how many unsolicited pictures I get when people submit their (adoption assistance) applications," said Susan Thomas, director of employment policies and programs at CIGNA Corp. in Philadelphia, which offers up to $2,500 in adoption benefits to its employees.

"They're so proud and so happy that they send in photographs of their baby, or themselves with the baby. That just makes me so happy," she said.

While some companies have offered adoption benefits for many years, generally those that have begun offering it in the past few years do so as part of a panoply of other work/life benefits, such as child and elder care.

Employers generally offer reimbursement for adoption benefits in the $2,000 to $5,000 range, covering expenses including legal fees, home studies, agency fees and, where relevant, travel to foreign countries for international adoptions.

Under a provision in tax legislation passed last year and effective Jan. 1, employers can reimburse employees for up to $5,000 of expenses per adoption, or $6,000 for a child with special needs, without the reimbursement being added to employees' taxableincome.

The law also allows individuals to take up to a $5,000 tax credit, or $6,000 for a special-needs child, for adoption-related expenses, though the credit and reimbursement must be for different expenses.

Tax-free reimbursement, as well as the tax credit, is available only to employees with adjusted gross incomes of $75,000 or less. Those with incomes between $75,000 and $115,000 receive less of a break as their income rises, with no tax-free benefits available for employees with adjusted gross incomes at or above $115,000 (BI, Jan. 13).

However, employers still are choosing to offer adoption assistance benefits to their higher-paid employees and may even "gross up" the amount they pay so the net benefit is comparable to that of lower-paid employees.

According to a recent report by Hewitt Associates L.L.C. in Lincolnshire, Ill., in 1996, 23% of employers offered some adoption assistance, almost double the 12% that offered it in 1991 (BI, April 28).

Employers have not needed the incentive of the tax legislation to offer adoption benefits, consultants say. "It's got some clients to talk about the issue, but frankly, I don't think the tax credit itself is going to be a sufficient motivation for a lot of change," said Randy Abbott, regional practice leader for Watson Wyatt Worldwide, based in Little Falls, N.J.

"It really comes down to philosophical issues," he said. "Employers that are sensitive to work/life issues, sensitive to the fact that some couples or individuals cannot have children naturally, have been doing this stuff for a long time," he said. "I've not seen a massive migration toward adoption assistance because of it."

"I haven't seen where that is stimulating any activity," Ginny Olson, a principal with Towers Perrin in Atlanta, said of the tax break.

However, companies that previously were offering $2,000 or $3,000 in adoption expenses are expected to increase their caps to $5,000 or $6,000 to take advantage of the tax break, said Richard Federico, a work/life consultant with the Segal Co. in New York.

More employers also are beginning to raise their adoption assistance benefit to the $6,000 to $7,500 range, and that is "going to be more and more mainstream over the next few years," predicted Mr. Abbott.

The competition for good employees is a key factor in introducing adoption benefits, observers say.

"I think a number of companies in the past few years have either added adoption to their benefits package or increased the subsidy that they cover, and I think part of the motivation is the whole notion of becoming the employer of choice and recognizing that the needs of employees are very diverse," said Karol Rose, a principal with The Kwasha Lipton Group in Fort Lee, N.J.

"This is all part of becoming a preferred employer or the employer of choice," agreed Judy Long, vp with Aon Consulting in Philadelphia. "When the job market was a lot tighter a few years ago, these things may not have made such a difference, but now that companies are really competing for highly specialized, talented employees, some of these traditional benefits, even something as simple as casual dress, can make a difference between two employment offers."

"Generation Xers," or those in their 20s, are "much more sensitive on what are the employer's values," she said.

Adoption benefits these days are often appropriately offered in conjunction with other programs, say observers. "I think what's important is to put it into the context of a real life-cycle approach, a life events approach to benefits," said Ms. Rose.

"As a stand-alone, it's certainly a piece of a puzzle, but most companies that are looking at adoption benefits also need to be looking at the full range of benefits that they're offering and making sure that the message is consistent, that they recognize the changing workforce, the diversity in the workforce and how having the right offerings will help them attract and retain the right people," she said.

Ms. Rose added, "Most companies that would have adoption assistance would also be companies that are looking at more progressive benefits and policies that address work/life issues" and offer, for instance, more generous leave policies and flexible work arrangements.

Mr. Federico said, "I think the emphasis now is not so much on the utilization of any one (benefit), but when you group them as a whole, how many touches do you get in total, because then you're really appealing to the very diverse segments of your workforce in a more meaningful way."

The introduction of adoption assistance programs "typically stems from a larger strategic assessment or employee requests over time and a gradual recognition by the employer that this is an issue for their population and something they need to address," said Watson Wyatt's Mr. Abbott.

"It's unusual for somebody to say, 'Oh, I have to offer an adoption assistance program' and put that in a vacuum without looking at the broader implications of that," said Towers Perrin's Ms. Olson.

Fel-Pro Inc., for instance, which offers $5,000 toward adoption legal expenses, has "such a wide range of work/life benefits here that this is just one of many," said Scott Mies, director of work/life programs at the Skokie, Ill.-based manufacturer of automotive sealing products.

A spokesman for Eli Lilly & Co. in Indianapolis, which offers up to $10,000 in assistance, said, "The adoption benefits are part of our work/family programs that are designed to help employees balance their work and family life and include such things as flex time, job sharing, a child care center and leaves of absence."

Observers also note that adoption assistance is economical in the sense that while relatively few employees take advantage of it, it increases employee morale generally.

Dublin, Ohio-based Wendy's International Inc., for instance, which offers up to $4,000 in adoption assistance, or $6,000 for special-needs children, has had less than 1% of those eligible for benefits, or just 23 employees, take advantage of its program since its April 1990 introduction, at a total cost of $105,000, said Benefits Administrator Karen Hamilton. This compares with more than 2,000 maternity cases costing more than $10.5 million, she said. "It's a very positive benefit, and it's been very well-received by the majority of our employees," she said.

Said Aon's Ms. Long, "One of the reasons I see companies offering this is that they get a lot of bang for the buck, in that it enhances the employees' perception of the company and also the community and customers' perception of the company." Yet few employees use it, "so it doesn't turn out to be a major expense."

It is analogous to dependent care, said Mr. Abbott. Only a very small percentage of an eligible workforce participates, "yet if you were to survey the employee population at large, you find that everybody supports the concept, and I think adoption assistance falls into the same category."

"The ability to have something available that even only a few employees use is obviously of great value to those employees," said Ms. Olson. However, it also "sends a message about employers' willingness to try to meet employees' needs."

"I think one of the trends we're seeing is companies becoming more socially responsible employers, and they're also realizing that there's a bottom-line benefit to enabling people to lead better lives," said Ms. Long.

"In this case, what they're doing is removing some of the financial worries, and in terms of socially responsible employers.*.*.encouraging adoptions through the programs."

"We have, as a company, a great commitment to families and to children," said Debbie Veney Robinson, CIGNA's assistant director-human resources communications. "We understand there are all different types of mothers," not just those who carry a child in their womb.

"We offer a lot of support programs for families, and adoptive families are a growing segment of American families, so we definitely thought it was the right thing to support," said Ms. Robinson.

"We think that there is a strong business case in helping people manage both ends of their lives," said the Eli Lilly spokesman. "That is, they come to work and they're more productive employees if they're not having to worry about things going on at home."

Equity is a factor as well, said Kwasha Lipton's Ms. Rose. While employers pay medical costs for the birth of a child, "the cost of adoption could be much greater," she said.

That was a factor in Washington, D.C.-based Fannie Mae's decision to offer benefits in 1994, said Rick Kennedy, director of employee benefits. The secondary mortgage company realized it was not offering a benefit "for that segment of our population that was unable to have children," said Mr. Kennedy. "We saw a need out there that wasn't being addressed."

One consideration whenever an employer introduces a particular benefit is whether it may alienate employees who are unlikely to use it, said Towers Perrin's Ms. Olson. However, adoption assistance is "generally not a problem," she said. "You don't have the backlash."

In fact, adopting is something single as well as married employees can do, Aon's Ms. Long noted.

"A lot of companies are moving from the term 'work/family' to 'work/life,' and part of that was a concern on the part of single employees who feel that some of the work/family benefits don't really relate to their single lot," said Ms. Long.

"Adoption expense reimbursement, I believe, is another means to provide equity to all employees," she said.

"It doesn't matter whether you're single or married."