Executive SummaryThe U.S. Supreme Court will hear arguments in four same-sex marriage cases in April, potentially settling the divisive issue by the end of the current term. The justices will consider an appeal from the 6th Circuit decision that upheld state same-sex marriage bans in Michigan, Ohio, Kentucky and Tennessee. Arguments are limited to the following two questions: 1) Does the Fourteenth Amendment require a state to license a marriage between two people of the same sex? 2) Does the Fourteenth Amendment require a state to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state?

The decision to hear these cases follows on the heels of (1) Florida's January 6th recognition of same-sex marriage following the U.S. Supreme Court's refusal to extend the stay of a federal district court decision finding the state's ban on same-sex marriages unconstitutional, and (2) the 5th Circuit's extremely critical questioning of state bans in Texas, Louisiana, and Mississippi. Only three federal courts have upheld state marriage bans since 2013 – the 6th Circuit, and federal district courts in Louisiana and Puerto Rico.

What this Means for Employers

Federal Treatment of Same-Sex Spouses will Not Change Regardless of the Court's Decision

Currently, federal law requires all federal benefits to be administered as if the state law and plan recognize same-sex marriage. This will not change regardless of the Supreme Court's decision.

  • Federal Tax: By now, no plan should be imputing income, for federal income tax purposes, to an employee for covering their same-sex spouse under the plan. The cost of benefits provided to same-sex spouses covered under the plan (regardless of whether they live in a recognition state) would not be imputed to the employee but would be treated on a pre-tax basis.
  • Federal Statutory Benefits: Plans must recognize same-sex spouses for the purpose of administering federal statutory benefits, such as HSAs, FSAs, and COBRA, regardless of whether the plan recognizes same-sex spouses.

State Treatment of Same-Sex Spouses

  • Depending on the Supreme Court's decision, fully-insured plans may be required to extend coverage to same-sex spouses.
  • Self-insured plans may use a plan-specific definition of spouse but may be subject to federal and state anti-discrimination claims.
    • This decision will not directly affect self-insured plans' ability to implement a plan-specific definition of "spouse."  The design and administration of self-insured welfare plans is governed by ERISA, the Internal Revenue Code, ACA and related regulations. Neither ERISA nor the Tax Code nor ACA require self-insured plans to offer employee benefits to spouses of any kind. Nor do those laws impact the way employers define the word "spouse" if they choose to offer employee benefits to spouses.  And, importantly, nothing in recent case law has or will change those particular laws.
    • Employees have begun successfully litigating the exclusion of same-sex spouses from self-insured plans under federal and state anti-discrimination laws. Recent case law has found that ERISA's preemption provisions may no longer provide protection for the design flexibility once afforded to employers providing self-insured plans. As a result, enacting a definition of "spouse" that is at odds with the state and federal definition may considerably increase a plan's potential exposure to lawsuits under state and federal anti-discrimination statutes, such as Title VII and the Equal Pay Act (EPA).