Same Sex Marriage and Benefits – What Now?
By Jamie Zveitel Kwiatek and Roxanne Nydegger
By now it’s likely most people have caught a breaking news story, a Twitter feed, a Facebook post, or our June 26, 2015 blog, on the ground-breaking Supreme Court same-sex marriage ruling in Obergefell v. Hodges. The ruling, which guarantees same-sex couples the right to marry in all 50 states, was one giant leap for mankind. But now that the dust has settled and the news stories are dwindling down, with respect to benefits, employers are faced with the question, now what?
Following the Supreme Court’s 2013 opinion in United States v. Windsor, same-sex couples had the full range of marital rights and benefits in all areas of federal law, including benefits. The recent Obergefell ruling extends rights by requiring states to license marriage between two people of the same sex and recognize a same-sex marriage lawfully licensed and performed out-of-state. Now, same-sex married couples have the same rights under both state and federal laws.
Before Obergefell, employers had a fiduciary duty to ensure that a same-sex marriage was valid in the jurisdiction in which it was entered for purposes of determining eligibility for survivorship or other benefits in its benefit plans. After Obergefell, it is no longer required because all states must now license same-sex marriages. Whether concerning a retirement plan or a health and welfare plan (such as health insurance coverage), employees in same-sex marriages must now be treated the same as any other married employee.
Domestic partner benefits, whether same-sex or opposite sex, has been a way for unmarried domestic partners to obtain employer-covered health insurance. After Obergefell, employers may decide that the equal opportunity for same and opposite-sex couples to marry and obtain health care coverage is generous enough and that, in light of the sometimes complex domestic partnership rules, those benefits should be eliminated from the plan. However, if the decision to eliminate domestic partner benefits is made, employers should be wary about eliminating coverage mid-year and instead provide a transition period so that employees can either decide to get married or find alternative coverage.
If an employer decides to eliminate domestic partner benefits mid-year, it may lead to an inconsistency with 125 plan (also known as “cafeteria plan”) elections. Currently, it is not clear that elimination of coverage for domestic partners would allow an election change under a 125 plan. If not, an employer may be required to withhold amounts from an employee’s pay for benefits that are not being provided. It may be argued that elimination of domestic partner benefits is a permitted mid-year change as a greatly modified benefit. However, employers should be hesitant to allow a change in status election without further guidance and may want to wait until an employee benefit plan’s open enrollment period to provide for changes in elections.
The Obergefell ruling is a good reason to perform compliance reviews to ensure plan documents, policies and procedures are up to date. Employers should consider beginning with the following:
Amend plan documents if necessary for compliance with Windsor and Obergefell.
Confirm beneficiary designation forms are up-to-date.
Eliminate any same-sex discriminatory language in plans and Summary Plan Descriptions.
Review retirement plan distribution election forms to ensure joint and survivor annuity elections and waivers properly recognize same-sex spouses.
Update new-hire literature.
Update qualified domestic relations order (QDRO) procedures to apply to same-sex divorce.
It is likely that the IRS will issue additional guidance on the effect of Obergefell. We will continue to follow the changes and monitor how the changes affect employers and benefit plans.