The United States Supreme Court ruled in United States v. Windsor that the portion of the Defense of Marriage Act (DOMA) that, for purposes of federal law, defines "marriage" as a union exclusively between one man and one woman as husband and wife and "spouse" as a person of the opposite sex who is a husband and wife is invalid. The court ruled that this portion of DOMA has the "effect to disparage and injure those whom the state, by its marriage laws, sought to protect in personhood and dignity." The portion of DOMA not challenged and therefore not addressed by the court, continues to allow a state to not recognize same-sex marriages performed under laws of other states. Because employee benefit plans are impacted by federal law, the court's 5-4 decision will have a major impact on the administration of employee benefit plans.

Under the court's decision, in a state that recognizes same-sex marriages, employee benefit plans that provide any type of spousal coverage must extend the coverage to a same-sex spouse. For example, tax-exempt spousal coverage under a company's health plan is now extended to a same-sex spouse. The cost of such extended coverage is no longer taxable as imputed income to the employee under Federal tax law and the employer's corresponding payroll taxes is reduced. On the qualified retirement plan front, because the court's decision affects the definition of "spouse," the rights of a spouse is extended to a same-sex spouse. A same-sex spouse has the right to the surviving spouse death benefits under a retirement plan and to take advantage of the spousal rollover rules. A same-sex spouse upon divorce has the right under a qualified domestic relations order to a division of retirement benefits. COBRA's continuation of health coverage and the availability of Family Medical Leave Act (FMLA) protections are also impacted.

However, many questions are left unanswered in light of the court's decision. For example, there is no certainty as to what happens for an individual who gets married in a state that recognizes same-sex marriage and yet works for a company in a state that does not recognize the marriage. What state laws would the employer need to apply? It is also unclear as to how the court's decision will apply retroactively. Is the employee who had imputed income for prior tax years whose same-sex spouse is recognized under state law entitled to a federal income tax refund for those tax years? There are no clear answers at this point.

It is anticipated that the federal government will provide guidance on many of these issues. For employers in the states that recognize same-sex marriages, employers should review their employee benefit plans documents and determine if same-sex spouses are covered under the plans and if plan amendments are required.

For employers in states that do not recognize same-sex marriages but, have employees who have same-sex spouses and were married in states that recognize same-sex marriages, there are no clear answers. Stay tuned for clarification and guidance from the IRS and other agencies on this important issue.