Also published in the Bucks County Herald at: http://edition.pagesuite-professional.co.uk//launch.aspx?eid=54729c10-ef84-4f53-9695-dd6a9de20b0a&pnum=11
On June 26, 2013, the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act (DOMA) unconstitutional. The impact of this decision on employers will depend upon the state(s) in which the employer operates and the state(s) in which its employees reside, along with future legislative action and judicial and administrative interpretations of the law.
Section 3 of DOMA defined “marriage” for Federal purposes as “a legal union between one man and one woman as husband and wife,” and “spouse” as a person of the opposite sex who is a husband or a wife. Section 2 of DOMA, which was not at issue in the decision and remains in force, provides that no state may be forced to recognize a same-sex marriage performed in another state. Before the Court’s decision, same-sex couples could not be considered married under Federal law, regardless of their state’s marriage laws, and employer-sponsored pension, 401(k) plans, and/or self-funded (but not fully-insured) welfare plans subject to the Employee Retirement Income Security Act (ERISA), were not required to recognize same-sex spouses of plan participants. After the Court’s decision, where a same-sex couple was married in a state that permits same-sex marriages and resides in a state that recognizes same-sex marriages, the couple is entitled to the same Federal benefits as any heterosexual married couple.
Pennsylvania and New Jersey Employers
Section 2 of DOMA creates complexity in applying the Court’s decision where states 1) permit same-sex civil unions, but do not call the union marriage (e.g., New Jersey), or 2) do not recognize same-sex marriage or statutorily prohibit same-sex marriage (e.g., Pennsylvania).
Because Section 3 was struck down, but Section 2 remains in force, a same-sex couple may be married for purposes of one federal law, but not for another. The Internal Revenue Code and the Family and Medical Leave Act (FMLA), define spouse as a husband or wife under the laws of the employee’s state of residence (which is referred to as a state of residence rule); however, immigration laws define marriage by the laws of the state in which the individuals were married (which is referred to as a state of celebration rule). Consequently, a same-sex couple who married in Vermont (which permits same-sex marriage), but now resides in Pennsylvania (which statutorily prohibits recognition of same-sex marriage), may be considered married for purposes of immigration law, but not for purposes of federal income taxes.
What is an employer to do? Employers should begin, as a matter of prudence and precaution, by reviewing the definition of marriage and/or spouse in their employee benefit plan documents, summary plan descriptions, employee handbooks and other communications to ensure the definition is still valid and consistent with the employer’s intent, and the benefits are being administered in compliance with the documents. A patchwork of state and local laws across the U.S. prohibit employment discrimination on the basis of sexual orientation; therefore, employers will want to thoughtfully consider and evaluate the administration of employee benefits to avoid compliance issues. Additionally, employers who already provide health and welfare benefits to same-sex spouses should prepare to discontinue or reverse the income imputed to employees who cover their same-sex spouses. For now, it appears civil unions, which are permissible in New Jersey and 3 other states, will not be given the same rights and benefits as marriage. The Office of Personnel Management (OPM), which is responsible for overseeing federal employee benefits, announced that marriages will be recognized regardless of the employee’s state of residence, but civil unions and domestic partnerships will not be recognized. Although OPM’s decision is not an official determination of the current state of the law, it can serve as a barometer.
The law in this area is expected to change rapidly. For example, within weeks of the Supreme Court decision, a federal law suit was filed claiming Pennsylvania’s ban on same-sex marriage is unconstitutional, and Pennsylvania’s Attorney General announced that her office will not defend the Commonwealth against the suit. Additional guidance from various federal agencies including the Department of Labor and the Internal Revenue Service is expected in the coming months, spurred by a directive from President Obama “to review all relevant federal statutes to ensure this decision, including its implications for Federal benefits and obligations, is implemented swiftly and smoothly,”
Employers with Other State Locations
Employers with facilities located in the District of Columbia or any of the 13 states that permit same-sex marriage (California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island (beginning August 1, 2013), Vermont, and Washington) may want to consider the impact of the decision on:
- Current employees or COBRA continuants with same-sex spouses, who may assert the change in law creates a change in status under the company’s cafeteria and/or health and welfare plan, permitting a change in enrollment in group health and other benefits.
- COBRA General Rights and Election Notices, along with COBRA administration procedures, which may need to be updated.
- Tax treatment of benefits provided to same-sex spouses and their child(ren), the value of which may not need to be taxed for federal income tax purposes, but may need to be reported for state tax purposes (e.g., where an employee resides in a state recognizing same-sex marriage, but works in a state that does not).
- The definition of spouse in employee benefit plan documents, insurance policies, employee handbooks, and company policies Family and Medical Leave Act (FMLA), all of which may need to be updated.
- We will continue to provide updates as agency guidance, legislative action, and/or judicial decisions are announced. For assistance in analyzing how this decision impacts your business, please contact the attorneys in our Employment & Labor section.
Employee Benefits after DOMA
The U.S. Supreme Court declared Section 3 of the Defense of Marriage Act (DOMA) unconstitutional. The impact of this decision on employers will depend upon the state(s) in which the employer operates and the state(s) in which its employees reside, along with future legislative action and judicial and administrative interpretations of the law. To learn more go to Employee Benefits after DOMA.