As you know, the Defense of Marriage Act (DOMA) is in danger. If the Supreme Court deems it unconstitutional, it could have far-reaching effects on benefits plans. Here’s what you need to know to prepare.
The ruling to watch for is the one for Windsor v. United States. That’s the one with the potential to create sweeping changes in the benefits landscape — mostly for those states that currently recognize same-sex marriages.
It’s the case where the constitutionality of Section 3 of the DOMA hangs in the balance. Section 3 strictly defines marriage as a union between a man and a woman.
If it’s deemed unconstitutional, it would mean changes for benefits pros when it comes to the administration of the following laws:
- Family Medical Leave Act (FMLA)
- Consolidated Omnibus Budget Reconciliation Act (COBRA)
- Employee Retirement Income Security Act (ERISA), and
- Health Information Portability and Accountability Act (HIPAA).
Not all states would treat ‘marriage’ the same
If Section 3 of the DOMA were to be struck down, there would be no definitive way to distinguish between opposite-sex and same-sex marriages under these laws.
So does that mean all employer plans covered under these laws would automatically need to treat both opposite-sex and same-sex married couples the same? Not according to the employment law attorneys at the firm Katten Muchin Rosenman LLP.
They’re saying that if Section 3 is deemed unconstitutional “that ‘spouse’ for the purposes of federal law will be determined based upon the substantive law of the state in which the employee/spouse resides.”
Translation: If you’re in one of the nine states (plus Washington D.C.) that recognizes same-sex marriages — Connecticut, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont and Washington — then yes, the administration of your plans would need to change.
Why just those states? If the federal definition of “spouse” is overturned, then state law will be what employers turn to for the administration of their plans.
The potential areas that would be impacted in the nine states mentioned above:
Currently, the FMLA allows eligible employees job-protected unpaid time off to care for a seriously ill family member — like a spouse. But that coverage doesn’t apply to same-sex spouses. That would likely change — at least in states that currently recognize same-sex marriages.
Under the law as it stands today, same-sex spouses do not have a legally protected right to obtain COBRA benefits — although there’s nothing stopping group health plan sponsors from extending COBRA-like benefits to same-sex spouses.
If Section 3 of the DOMA is shot down, a same-sex spouse may become entitled to COBRA eligibility — again, depending on state law.
There are several ways an unconstitutional verdict for Section 3 could impact ERISA plans:
- Under current federal law, employees can add a new spouse to their health plan immediately, and if an employee’s spouse were to lose group health coverage, he or she can usually join the employee’s group health plan without waiting for the next open enrollment period. But these rules currently do not apply to same-sex spouses, which could change if Section 3 is overturned.
- If same-sex marriage is recognized at the federal level, the tax treatment of health benefits for same-sex couples could become relatively straightforward. Currently, the health benefits employees and their dependents receive are non-taxable. However, same-sex spouses receiving benefits are the exception to this rule. Right now, the value of employer-provided group health benefits for a same-sex spouse results in additional income tax and payroll tax requirements. But if the feds start to recognize same-sex marriage, the extra tax burdens would likely get tossed.
- Currently, the reimbursement of same-sex spouse expenses under a flexible spending arrangement (FSA), health reimbursement arrangement (HRA) or health savings account (HSA) are taxed. But that requirement may also be tossed if Section 3 of the DOMA is overturned.
- When it comes to retirement plans, if the DOMA’s definition of “spouse” is wiped out, it stands to reason that same-sex spouses would be entitled to the same spousal rights as opposite-sex spouses. This could have a significant impact on areas such as survivor benefits and hardship withdrawals.
If same-sex marriage is recognized at the federal level, it would appear likely that all HIPAA special enrollment rights for opposite-sex married couples should also be offered to same-sex married couples — again, assuming the state you’re in recognizes same-sex marriages.
Currently, same-sex spouses are not guaranteed HIPAA special enrollment rights — although special enrollment rights may extend to same-sex spouses if they are covered by a plan’s definition of “dependent.”