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The Implications Of Universal Same-Sex Marriage For Employee Benefit Plans

The recent landmark decision of Obergefell v. Hodges held that state laws banning same-sex marriages are unconstitutional. The Obergefell decision extends the Court’s prior 2013 decision in United States v. Windsor  which held unconstitutional the section of the Defense of Marriage Act prohibiting the federal government from recognizing state laws that allow same-sex marriage. Obergefell moves beyond Windsor and prohibits the states from banning same-sex marriage. This Client Alert discusses the implications of Obergefell in the context of employee benefit plans.

Qualified Retirement Plans

The recent Supreme Court decision is not expected to significantly change the terms of qualified retirement plans. The Supreme Court ruled in Windsor  that federal law recognizes any marriage that is valid under state law. Consequently, the IRS required plans to include legally married same-sex spouses within the meaning of “spouse” for retirement plan purposes. The IRS and Department of Labor provided guidance to the effect that a valid same-sex marriage in one state must be recognized in any state for benefit plan purposes. The Supreme Court has now ruled that same-sex marriage must be permitted in every state. Thus, retirement plans will continue to recognize all legal marriages; the difference is that all states must permit same-sex marriages. Plan sponsors should review their plans to ensure the definition of “spouse,” or any other provisions, are consistent with the Obergefell decision.

Self-Insured Health and Welfare Plans

Private sector self-insured health and welfare plans are subject to the federal mandates of ERISA and generally not state laws that affect employee benefits. Neither ERISA nor the recent Obergefell decision directly require self-insured plans to cover same-sex spouses. However, in light of the equal protection rights afforded to same-sex married couples under Obergefell, a self-insured plan that covers opposite-sex married couples and not same-sex married couples may be contrary to federal law. In light of the Obergefell case, such plans should be carefully reviewed.

Insured Health and Welfare Plans

Unlike non-governmental self-insured health and welfare plans, insured health and welfare plans are subject to state insurance law. As a result, it seems clear that where a plan covers a participant’s spouse, such coverage shall extend to same-sex spouses in all states.

Domestic Partners Revisited

The trend in the employee benefits community over the past several years has been to recognize relationships regardless of sexual orientation. Many plans, in advance of legal dictates, voluntarily allowed coverage of same-sex partners through domestic partner provisions and policies. The provisions and policies often entail a process of representations on the part of the plan participant and verification procedures. In addition, because domestic partners are not legally married, plan sponsors must impute income to the participant for certain domestic partner benefits. Now that same-sex couples may marry in any state, domestic partner provisions and policies may no longer be desired or deemed necessary by plan sponsors. Simply put, due to the fact that same-sex couples may be legally married in any state, there may no longer be a need to recognize domestic partners.

Action Items

Plan sponsors should:

  • Review their qualified retirement plan provisions to ensure consistency with Obergefell.
  • Review and consider the terms of health and welfare plans; if the self-insured health and welfare plan excludes same-sex spouses, analyze and assess any potential compliance risk.
  • Contact your insurance carrier with respect to possible changes in your insurance policies.
  • Revisit your domestic partner provisions and policies.
  • Stay tuned for clarifying guidance with respect to open issues including whether Obergefell will be applied retroactively.