Obergefell v. Kasich and Cozen O’Connor v. Tobits may reflect a growing trend of courts and other bodies to recognize same-sex marriages validly celebrated elsewhere even if the couple’s current state of residence does not recognize such marriages. Pending further guidance, employers should begin discussing plan amendments and administrative procedures that may be necessary to clarify benefit eligibility for same-sex spouses and partners.
Earlier this morning, in the case of U.S. v. Windsor, the Supreme Court of the United States found Section 3 of the Defense of Marriage Act (DOMA) to be unconstitutional. In a 5-4 decision authored by Justice Kennedy, the Court ruled that Section 3 of DOMA deprived same-sex couples of the equal protection guarantee of the Fifth Amendment of the U.S. Constitution. Note that the Windsor decision only applies to Section 3 of DOMA (which previously prohibited same-sex couples from enjoying any benefit under federal law). The decision does not apply to another key provision of DOMA that allows one state to refuse to recognize same-sex marriages performed in another state.
In the separate Hollingsworth v. Perry case challenging California’s Proposition 8 (which prohibited same-sex marriages), the Court ruled that it lacked jurisdiction to rule on the constitutionality of Proposition 8. This ruling has the effect of reinstating the original opinion of the United States District Court for the Northern District of California which found Proposition 8 unconstitutional under California law and prohibited the enforcement of Proposition 8 statewide. As a result, same-sex marriages will resume in California relatively shortly (perhaps in as soon as a month). As widely expected, the Court did not declare a constitutional right to marry in all states.
Employers providing benefits for employees’ same-sex spouses may want to consider the availability of federal payroll tax refunds if the Supreme Court of the United States finds Section 3 of the Defense of Marriage Act (DOMA) unconstitutional. Employers currently must impute income to an employee for the fair market value of benefit coverage for a non-dependent same-sex spouse. Such imputed income is subject to federal income and payroll taxes, as well as state income taxes in the majority of states.
As a result of the federal Defense of Marriage Act (DOMA), same-sex relationships have not been recognized for any purpose under any federal law, including the Employee Retirement Income Security Act, the Internal Revenue Code and COBRA. Historically, this has created significant implications for the administration of benefit plans covering same-sex partners, including the taxation of health, dental and vision benefits and survivor benefits under retirement plans. Employers that have extended equal benefits to lesbian, gay, bisexual and transgender employees have faced significant administrative and other challenges. Employers that have not extended benefits to same-sex partners have struggled to understand their legal obligations.
Earlier this year, the Supreme Court of the United States heard arguments on the constitutionality of DOMA and on California’s “Proposition 8,” which denies same-sex couples the right to marry in that state. The Supreme Court is expected to issue its rulings in these cases in June. Based on this, McDermott Will & Emery invites you to a webcast to discuss the impact of these landmark decisions on employee benefit plan sponsors and to address key considerations for employer-provided plans, including:
An up-to-date description of the federal taxation of health and welfare benefits
A summary of steps employers must take in light of the Supreme Court’s decisions
What benefits must employers offer to same-sex partners
On March 26 and 27, 2013, the Supreme Court of the United States heard oral arguments in cases challenging the constitutionality of the federal Defense of Marriage Act (DOMA) and California’s Proposition 8. A Supreme Court ruling in either case may have significant implications for employee benefit plans given the many federally mandated spousal benefits that currently do not extend to same-sex spouses in light of DOMA.
Two recent cases challenging benefit eligibility for same-sex spouses highlight the need for employer-sponsored retirement and welfare plans to clearly define "spouse" for eligibility purposes. Employers may want to review their plan documents to determine whether plan amendments are needed to clarify benefit eligibility for same-sex spouses in light of the upcoming ruling by the Supreme Court of the United States on the constitutionality of the federal Defense of Marriage Act.
As same-sex marriages began taking place over the weekend in New York state (click here for more information on the benefit implications of that development), another development that could have even more far-ranging implications for benefit plans also occurred last week. Specifically, last week the Senate Judiciary Committee held hearings on a bill entitled the “Respect for Marriage Act” which would repeal the Defense of Marriage Act’s (DOMA) definition of marriage for purposes of federal law as a union between one man and one woman. If the Respect for Marriage Act were enacted, it would — among other things — significantly complicate the administration of benefit plans on a multitude of issues such income tax inclusion, COBRA, death benefits, etc. (For more information, click here). There could also be significant confusion regarding whether a same-sex marriage entered into in one state can or must be recognized by another state; the federal DOMA inspired many states to enact their own mini-DOMA statutes, the constitutionality of which might be in question if the Respect for Marriage Act were enacted.
Legislative prospects for the Respect for Marriage Act are difficult to predict. However, consistent with the Administration’s position to stop enforcing portions of DOMA (click here for more information), the President has indicated his willingness to sign the Respect for Marriage Act if presented to him.
The Illinois Religious Freedom Protection and Civil Union Act, which legalizes civil unions for same-sex and opposite-sex partners, takes effect on June 1, 2011. The law entitles civil union partners to all of the legal rights and obligations that opposite-sex spouses have under Illinois state law by requiring that a party to a civil union be included in any use of the terms “spouse,” “family,” “immediate family,” “dependent,” “next of kin” or other terms that denote a spousal relationship throughout Illinois law. Illinois will recognize as a civil union any same-sex marriage, civil union or substantially similar legal relationship entered into in other states.
The application of the Illinois law is complicated by the intersection of federal and state law. The federal Defense of Marriage Act (DOMA) continues to define a “spouse” as a husband or wife of the opposite sex. A civil union in Illinois will not, therefore, be a “marriage” under DOMA. As a result of DOMA, parties to an Illinois civil union will not be entitled to federal law benefits applicable to opposite-sex spouses (e.g., qualified joint and survivor annuity (QJSA) and qualified pre-retirement survivor annuity (QPSA) benefits under tax qualified retirement plans, COBRA coverage, etc.). Note, however, that on March 16, 2011, both the U.S. House and Senate introduced legislation to repeal DOMA (The Respect for Marriage Act of 2011), and to tie federal law marital status to an individual’s marital status in the State where the individual entered into the marriage. The Respect for Marriage Act bills currently rest with the Judiciary Committees of the House and Senate, and the next step for each (e.g., Committee vote, hearings, Senate and/or House floor vote) is unclear.
Because the new Illinois civil union law may impact areas such as employee benefit plans, employer leave policies (including the Illinois Family Military Leave Act) and any other employer-provided benefits covering spouses, employers should ensure such programs are in compliance with the June 1, 2011 law change. More information on the employee benefit plan implications of the legalization of civil unions in Illinois can be found here, while the impact on Religious Organizations benefits is discussed here.
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