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Same-Sex Marriage Ruling - What Does It Mean for Employee Benefit Plans?

    Client Alerts
  • July 03, 2015
In a 5-4 decision announced last Friday, the U.S. Supreme Court held in Obergefell v. Hodges that all states are required to recognize same-sex marriages. This ruling follows the Supreme Court’s 2013 decision in U.S. v. Windsor that overturned Section 3 of the Defense of Marriage Act (“DOMA”), which had limited marriage for purposes of federal law to opposite-sex couples. As a result of Windsor, any federal law that refers to a “marriage” or “spouse” applies equally to legally married same-sex couples. However, Section 2 of DOMA that allowed states to limit recognition of same-sex marriage for state law purposes remained in effect. With the Obergefell decision, the Supreme Court has held that the Fourteenth Amendment of the Constitution requires states to license marriages between same-sex couples and to recognize marriages of same-sex couples legally performed in another state. 

Following the Windsor decision in June 2013, the IRS issued guidance confirming that same-sex spouses were to be treated the same as opposite-sex spouses for benefit plans governed by federal law, such as tax-qualified retirement plans (e.g., 401(k) plans, pension plans) and Section 125 cafeteria plans. Most private sector employers already have adopted amendments to these types of plans and updated related administrative practices accordingly. Therefore, the Obergefell ruling should have little impact on such plans.  Governmental employers also will now have to recognize same-sex spouses under their retirement plans. 

For health, dental, vision, life insurance and other welfare plans, the ruling may have more significant implications, particularly in states where same-sex marriage was not previously legal. For an insured benefit plan that is subject to state insurance laws, same-sex spousal coverage likely will be required if the plan provides coverage for opposite-sex spouses. For self-insured plans not subject to state insurance laws, ERISA does not mandate same-sex spousal coverage or even spousal coverage at all, so same-sex spouses have been ineligible for coverage if the plan terms provide for such an exclusion. However, with the Supreme Court’s ruling in Obergefell, employers may face an increased risk of discrimination claims under state or federal law if coverage is available for opposite-sex spouses but not same-sex spouses. In addition, in recent decisions and enforcement positions, the EEOC has indicated that lesbian, gay and transgendered individuals may bring sex discrimination claims under Title VII in some circumstances involving gender stereotyping. In light of the evolving legal landscape, plan sponsors of self-insured plans will want to review the definition of spouse in their plan documents and consider changes.

A somewhat related implication of the Supreme Court’s ruling is that same-sex spouses also will be treated as spouses for FMLA purposes, which means an employee will be entitled to take leave under FMLA to care for a same-sex spouse, regardless of the state in which the employee lives or was married. 

This Supreme Court ruling does not apply to domestic partner relationships. A number of employers have voluntarily offered domestic partner benefits to same-sex couples because same-sex marriage was not available. Some employers are considering whether to eliminate or phase out domestic partner benefits since same-sex couples are now free to marry in all 50 states, particularly since domestic partner benefits involve complicated tax implications for both employees and employers. 

Questions remain regarding how and when employers will need to transition plan administration and amend plan documents. As the case with the previous Windsor decision, the IRS and the Department of Labor are expected to issue guidance on these issues.