Now that same-sex couples have the freedom to marry in every state, employers must consider whether plan amendments and administrative changes are necessary.
On June 26, the US Supreme Court issued its landmark decision in Obergefell v. Hodges, ruling that all states must issue marriage licenses to same-sex couples and must also fully recognize same-sex marriages lawfully performed out of state. The 5-4 majority opinion, written by Justice Anthony Kennedy, holds that the right to marry is a fundamental right inherent in the liberty of the person under the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the US Constitution and that same-sex couples may not be deprived of that right.
The affirmation of same-sex marriage rights comes exactly two years after the Supreme Court struck down section 3 of the Defense of Marriage Act (DOMA) in United States v. Windsor, holding that DOMA was a deprivation of same-sex couples’ due process and equal protection rights guaranteed under the Fifth Amendment. The Windsor decision addressed only the issue of whether the federal government must recognize same-sex marriages for federal law purposes if they were valid in the state in which they were performed. It did not address whether states are required to allow same-sex couples to marry or whether states are required to honor same-sex marriages lawfully performed in other states. The Obergefell decision answers both of these questions in the affirmative.
Obergefell v. Hodges
Obergefell is a consolidation of 16 petitioners' cases initially filed separately in federal district courts in each of their home states. The petitioners, 14 same-sex couples and two individuals whose same-sex partners are deceased, filed suits claiming that by denying them the right to marry or by not recognizing their marriages that were lawfully performed in another state, their home states were violating their due process and equal protection rights under the Fourteenth Amendment. Each district court ruled in the petitioners’ favor, but the US Court of Appeals for the Sixth Circuit reversed. The US Supreme Court granted certiorari.
The Obergefell decision extends the freedom to marry to same-sex couples and requires states to fully recognize same-sex marriages legally performed in other states. The opinion was authored by Justice Kennedy and joined by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan. Justice Kennedy's opinion for the Court holds that the Fourteenth Amendment's protection of an individual’s right to liberty extends to the right to marry and that state constitutions and laws that refuse to extend this right to same-sex couples deprive them of this protected liberty right without due process. The opinion also identifies the unequal treatment as a violation of same-sex couples' equal protection rights. Chief Justice John Roberts, Jr. authored a dissenting opinion, which was joined by Justices Clarence Thomas and Antonin Scalia. In addition, Justices Scalia, Thomas, and Samuel Alito each wrote separate dissenting opinions, each of which was joined in by one or more of the other dissenting justices. The dissenters' common theme was that the majority created a new national "substantive due process" right to same-sex marriage and, by so doing, foreclosed the ability of the states, through democratic processes, to decide whether to recognize same-sex marriage on a state-by-state basis.
Next Steps and Practice Pointers
Although the Court's decision in Obergefell settles the issue of the right to same-sex marriage in all 50 states, it creates a number of benefits-related questions for employers and benefit plans to address. In light of the decision, employers and plans should take the following actions:
- Review employee benefits plans' definitions of "spouse" and consider whether the Court's decision will affect the application of the definition (e.g., if the plan refers to spouse by reference to state laws affected or superseded by the Obergefell decision). Qualified pension and 401(k) plans generally conformed their definitions of spouse to include same-sex spouses post-Windsor to comply with Internal Revenue Code (IRC) provisions that protect spousal rights in such plans, but health and welfare plans may not have been so conformed.
- Practice Notes
- Employers with benefit plans that treat same-sex spouses differently than opposite-sex spouses should consider whether to maintain that distinction. Nothing in Obergefell expressly compels employers to provide the same benefits to same-sex and opposite-sex spouses, and self-insured Employee Retirement Income Security Act (ERISA) health and welfare plans are not subject to state and municipal sexual orientation discrimination prohibitions. However, post-Windsor, qualified employee pension benefit plans are subject to IRC provisions that require equal treatment for same-sex spouses, and employee benefit plans sponsored by federal, state, and local governments and other employee benefits provided outside the scope of ERISA are subject to applicable sexual orientation discrimination prohibitions. Moreover, all benefit plans and policies, including ERISA health and welfare plans, may be subject to challenges based on gender-based discrimination. Therefore, in the wake of Obergefell, employers that maintain such distinctions should anticipate challenges to this type of plan design.
- We anticipate significant effort will be made in the wake of Obergefell to extend discrimination protection to all lesbian, gay, bisexual, and transgender employees through either administrative or legislative activity at the federal level, as well as in those states that do not already prohibit sexual orientation–based discrimination. Those protections may provide for religious belief exemptions.
- Practice Notes
- Communicate any changes in the definition of spouse or eligibility for benefits to employees and beneficiaries, as applicable.
- Update plan administration and tax reporting to ensure that employees are not treated as receiving imputed income under state tax law for any same-sex spouses that are covered by their employer-sponsored health and welfare plans, to the extent that coverage for opposite-sex spouses would otherwise be excluded from income.
- Practice Notes
- In the wake of Obergefell, employers with multistate operations will no longer have to concern themselves with administering benefit plans that cover states with varying marriage laws; instead, spousal benefits can be administered uniformly to all legally married opposite-sex or same-sex spouses throughout the United States.
- Employers should consider when to stop imputing income for health coverage for same-sex spouses and identify imputed income for all of 2015. These steps are necessary so that an employee’s W-2 may be adjusted at the end of the year or the employer can report the amount that an employee should back out of his or her 2015 state income.
- We anticipate additional guidance on the imputed income issue from those states where same-sex marriage was banned before the decision, addressing, among other things, the potential retroactivity of the state and local tax consequences of the decision.
- Practice Notes
- If an employer currently covers unmarried domestic partners under its benefit plans, it may want to consider whether to eliminate coverage for such domestic partners on a prospective basis (and therefore only allow legally recognized spouses to have coverage). Employers that make that type change also will need to determine the timing and communication of such a change.