Both supporters and opponents of same-sex marriage in Idaho are on hold after the United States District Court for the District of Idaho’s decision invalidating Idaho’s same-sex marriage ban was delayed pending appeal to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit has fast tracked the appeal, but it will not hear oral argument until September and a decision will not likely be issued for several months after that.
Similar decisions have been made in United States District Courts across the country. The United States Court of Appeals for the Tenth Circuit, the first Circuit to decide the issue, ruled in late June that state bans on same-sex marriage are unconstitutional.
While the Ninth Circuit determines the issue, Idaho employers should prepare for the real possibility that same-sex marriages will be recognized by Idaho in the near future and take steps to comply with new federal rules on same-sex marriage by determining whether to extend employee benefits to same-sex spouses and ensuring that decision is properly documented.
Same-sex spouse coverage not required for most employee benefits
Even if same-sex marriages are recognized in Idaho, state and federal laws generally do not require employers to extend employee benefits to same-sex spouses. For example, if an Idaho employer allows employees to elect health coverage for opposite-sex spouses, the employer will not be required under federal or Idaho law to also offer coverage to same-sex spouses (even if the Idaho ban is invalidated). (One caveat is the potential for discrimination issues, as described below).
Accordingly, it is important for employers to determine whether they will offer medical coverage and other employee benefits to same-sex spouses. Many employers are waiting to make a decision regarding same-sex spouse coverage until an employee requests coverage for his or her same-sex spouse. However, an after-the-fact decision can be problematic for several reasons and invites litigation. Employers that decide to limit coverage to opposite-sex spouses will be in a much better position if they document that decision before same-sex spouse coverage is requested.
IRS and DOL recognition of same-sex marriage
For most purposes, the Department of Labor (DOL) and Internal Revenue Service (IRS) have both adopted a rule that they will recognize all same-sex marriages entered into in states that allow same-sex marriage, regardless of the couple’s state of residence (the state of ceremony rule).
The main exception to this generally applicable rule, however, was that the DOL had issued guidance recognizing same-sex spouses for Family and Medical Leave Act purposes only if the couple resides in a state that recognizes same-sex marriage (the state of residence rule). The result was that an employee who was legally married to a same-sex spouse could be denied FMLA leave related to his or her same-sex spouse if residing in a state that did not recognize same-sex marriage.
On June 20, 2014, however, the DOL announced a proposed rule extending the state of ceremony rule to FMLA leave. Once adopted, the revised regulation will permit eligible employees to take FMLA leave to care for their same-sex spouse with a serious health condition, take qualifying exigency leave due to their same-sex spouse’s covered military service and take military caregiver leave for care for their seriously ill or injured same-sex spouse who is a covered service member. As a result, the state of ceremony rule will apply for virtually all IRS and DOL purposes.
Potential discrimination issues
As employers determine whether to offer employee benefit coverage to same-sex spouses, they should keep in mind that although federal and Idaho law do not necessarily require employers to offer same-sex spouse coverage, other applicable laws may require such coverage.
Several Idaho cities (including Boise, Coeur d’Alene, Ketchum, Moscow, Sandpoint, Idaho Falls, Pocatello and, most recently, Victor) have adopted ordinances prohibiting discrimination on the basis of sexual orientation. If Idaho begins to recognize same-sex marriage, employers that offer medical coverage and other employee benefits to opposite-sex spouses of employees in these cities could violate these non-discrimination ordinances if they do not also offer benefits to same-sex spouses.
In addition, the law of other states may require Idaho employers offering opposite-sex spouse benefits to employees in other states to also offer same-sex spouse benefits. For example, if an Idaho employer has California employees, any spousal coverage should be offered to both opposite-sex and same-sex spouses of California employees.
Potential employment tax issues
Finally, as employers determine whether or not to offer same-sex spouse benefit coverage, they should also examine the employment tax consequences of that decision.
For federal employment tax purposes, same-sex spouse coverage is generally tax-free. However, the value of benefits provided to same-sex spouses is taxable for Idaho income tax purposes. This may change depending on the Ninth Circuit’s decision on Idaho’s same-sex marriage ban. The taxation of benefits provided to same-sex couples varies from state to state.
Ensure plan documentation reflects decision
Once an employer decides whether or not to offer coverage to same-sex spouses, it should carefully review plan documentation to confirm it is consistent with that decision.
Plan documentation for medical and other employee benefits is often ambiguous. For example, many medical plans define spouse as any “legal spouse.” This definition is ambiguous in light of the many recent changes to the law regarding same-sex spouses and should be clarified. An ambiguous definition of spouse can cause a significant litigation risk if a same-sex spouse is denied coverage and is inclined to test his or her rights in court.
Even though many questions remain regarding an employer’s obligation to recognize same-sex spouses, it is important for employers to be proactive in deciding whether or not to offer same-sex spouse coverage and ensuring that plan documents are revised accordingly.