Yesterday, the U.S. Supreme Court issued its much-anticipated decision in United States v. Windsor, and held (in a 5-4 decision) that key provisions of the federal Defense of Marriage Act (DOMA) are unconstitutional. This decision potentially has significant implications for employer-sponsored health and retirement plans, but it also raises a number of questions.
In 1996, as states were beginning to consider the concept of same-sex marriage, and before any state had acted to permit it, Congress enacted the Defense of Marriage Act. One key provision of DOMA defined the term “marriage” as “a legal union between one man and one woman as husband and wife,” and defined the term “spouse” as “a person of the opposite sex who is husband or a wife.” Since the enactment of DOMA, these comprehensive definitions have controlled over 1,000 federal laws in which marital or spousal status is addressed as a matter of federal law, including certain laws impacting employee benefit plans.
For example, employer-paid health benefits are generally only excludable from an employee’s income if they are employer-paid and are attributable to coverage for the employee’s “spouse.” Because of DOMA, a same-sex spouse could not qualify as a “spouse,” and thus, an employee with a same-sex spouse has been taxed on the value of health coverage provided by an employer to the same-sex spouse.
Another example involves employer-sponsored retirement plans. Spouses have rights under retirement plans governed by ERISA and the tax code. In addition, divorcing spouses often obtain a qualified domestic relations order (QDRO) to assign a portion of the employee’s retirement plan account to a former spouse. As a result of the DOMA decision, plan administrators and employers will need to determine whether same-sex spouses now have the rights previously provided to opposite-sex spouses.
In Windsor, the U.S. Supreme Court ruled that DOMA is unconstitutional because it violates basic due process and equal protection principles. As a result of this decision, Oklahoma employers who have employees living in states that recognize same-sex marriage may need to amend their plan documents and various benefit procedures to reflect the fact that same-sex spouses must now be treated the same as opposite-sex spouses.
Many questions remain. For example, if an employee moves from one state that recognizes same-sex marriage to Oklahoma (which does not recognize same-sex marriage), does an Oklahoma employer have to recognize the same-sex marriage? We believe that the various federal agencies, including the Internal Revenue Service, will be working quickly to develop guidance clarifying the implications of the U.S. Supreme Court’s decision in Windsor. But until then, it is important for you to be aware of these benefit plan issues, and to call us if you have employees in any of the 12 states that currently recognize same-sex marriages.