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Employers are revisiting how they design their plans
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On Oct. 6, 2014, the U.S. Supreme Court
denied review of seven petitions challenging federal court of appeal rulings in the Fourth, Seventh, and Tenth Circuits that had struck down state bans on same-sex marriage. The Supreme Court’s orders did not legalize same-sex marriage in all states; however, they do mean that lower-court decisions went into effect striking down bans in Indiana, Wisconsin, Utah, Oklahoma and Virginia, so same-sex marriages will be recognized in these states. Same-sex marriage should soon be legal in six more states (Colorado, Kansas, North Carolina, South Carolina, West Virginia and Wyoming) that are bound by the regional federal appeals court rulings that had struck down other bans.
Same-sex marriage was already legal in the District of Columbia and 19 U.S. states.
What does the Supreme Court’s action (or rather, inaction), mean for employers that maintain employee benefit plans? The Internal Revenue Service and U.S. Department of Labor (DOL) had
previously issued guidance that provides, for purposes of the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA), that whether a marriage is valid depends on its recognition in the state where the marriage ceremony occurs. This means federal protections under ERISA and the tax code already extended to same-sex spouses—even those who reside in one of the states in which same-sex couples cannot marry.
As for employee benefit plan issues that are not dictated by the tax code or ERISA, the recent Supreme Court decision does not directly impact an employer’s ability to decide whether to extend coverage to a same-sex spouse. As the law stands today, sponsors of self-insured health plans may continue to choose whether or not to offer coverage to same-sex spouses (and state law that provides otherwise should be preempted by ERISA). Earlier this year, a federal district court in New York
found that a self-insured employer health plan that extended eligibility only to opposite-sex spouses did not violate section 510 of ERISA.
However, because limiting health coverage to opposite-sex spouses may lead to challenges or employee relations issues, some employers are revisiting how they want to design their plans. Employers that sponsor fully insured health plans also must consider the impact of state insurance laws that may require same-sex spousal coverage.
Below is a list of the protections and rules that currently apply under ERISA and the tax code to all “spouses,” using the IRS’s and DOL’s definition that looks to the state of ceremony for determining the legality of the marriage.
Qualified Retirement Plans
Assuming a same-sex marriage occurs in a state that recognizes same-sex marriage, the following protections are available:
Also, plan sponsors need to check the terms of their tax-qualified plans to determine whether they need an amendment to reflect the IRS guidance that recognizes a marriage based on the state of ceremony. (For example, plans that define “spouse” based on the
Defense of Marriage Act will need to be updated.) Generally, plan sponsors have until the end of 2014 to update their plans to address the IRS guidance.
Health and Welfare Benefit Plans
Christina Broxterman is an attorney shareholder in the Atlanta office of Ogletree Deakins.
Karen Shriver is an associate in the firm’s Atlanta office.
© 2014 Ogletree Deakins. All rights reserved. Reposted with permission.
Related External Article:
Group health plans for same-sex spouses: Equal treatment required or not?, McAfee & Taft, November 2014
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