How the Supreme Court Rulings Affect Employee Benefits

The Supreme Court's decision in Windsor, which invalidated Section 3 of the Defense of Marriage Act (DOMA), is fundamentally a ruling on tax law -- but there are several key employee benefit and HR areas that are affected.

Before DOMA's 1996 enactment, the IRS deferred to a given state's definition of "spouse." DOMA blocked that, but Windsor restored the original IRS ability to accept state definitions. As a result, same-sex spouses in states that legally recognize their marriages can now:

The United States Supreme Courts

Where Is Same-Sex Marriage Recognized?

California, Connecticut, Delaware*, Iowa, Maine, Maryland, Massachusetts, Minnesota**, New Hampshire, New York, Rhode Island**, Vermont, Washington and the District of Columbia

*Effective date is July 1, 2013
**Effective date is August 1, 2013

  • File joint tax returns;
  • Receive property from a spouse who has died without paying estate taxes;
  • Give property to a spouse without gift tax implications; and
  • Not be taxed on the value of a spouse's health benefits.

The tax return filing status and non-taxable health benefits may require employers to make adjustments to payroll tax withholding schedules. It might also involve filing a claim for a refund of any payroll taxes an employer paid on the value of a formerly unrecognized spouse's health benefits, if the ruling is retroactive.

There are key employee benefit and human resource policy areas that effect employers in the states directly involved:

  • COBRA: Coverage must be offered that covers an employee's same-sex spouse.
  • FMLA: An employee in a same-sex marriage is eligible for leave to take care of a sick spouse.
  • Divorce and Family Law: An employer may need to administer qualified domestic relations orders (QDROs) with respect to a divorce or newly recognized spouse
  • Survivor Benefits for Retirement Plans and Annuities: Same-sex married couples have newly expanded eligibility.

Employers in impacted states need to review their policy manuals and forms to ensure consistency with the Court's ruling.

What Happens Now?

While there are some steps that need to be taken immediately, experts advise that employers should wait until guidance is released to take other steps.

After the ruling, President Obama stated: "I've directed the Attorney General to work with other members of my Cabinet to review all relevant federal statutes to ensure this decision, including its implications for federal benefits and obligations, is implemented swiftly and smoothly."

You can expect the federal government to issue a flurry of new regulations in this area reflecting the Supreme Court's decision.

Employees who are married to individuals of the same sex who previously did not reveal their status to their employers because it did not entitle them to any benefits (at least not without added cost), may come forward now, impacting the configuration of health plan enrollment status.

Some of these new rights may be retroactive. Consult your attorney or an HR professional for more on how the Court's ruling may affect your business or not-for-profit organization.

(Click here for an article about how the Supreme Court rulings will affect the federal taxes of same-sex married couples, as well a description of the cases.)

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