On June 26, 2013, the United States Supreme Court issued a decision in United States v. Windsor (“Windsor”), holding that benefits offered under federal law to opposite-sex spouses must also be offered to same-sex spouses in the states that recognize same-sex marriage. Employers should carefully review their health, welfare, and retirement plans and implement any changes that may be necessary to comply with the Court’s ruling. Employers that operate in multiple states will also need to determine the best way to administer their plans under the inconsistent state laws regarding same-sex marriage.
Q&B Key: On June 26, 2013, the Court also issued a decision addressing same-sex marriage in California. In Hollingsworth v. Perry, the Court ruled that the petitioners in that case did not have standing to contest a trial court’s decision that had overturned California’s ban on same-sex marriage (known as “Proposition 8”). It appears that under Hollingsworth same-sex marriage will again be legal in California. Hollingsworth does not affect health, welfare, or retirement plans on a national level.
Brief Summary of United States v. Windsor. In Windsor, the Court ruled in a 5–4 decision that Section 3 of the Defense of Marriage Act (“DOMA”) violates equal protection under the Fifth Amendment to the United States Constitution. Section 3 of DOMA defines “marriage” as “a legal union between one man and one woman” and “spouse” as “a person of the opposite sex” for purposes of federal law. Accordingly, federal law will generally defer to state law on which individuals are in a “marriage” and who is a “spouse.”
The Court’s decision applies only to “lawful” same-sex marriages, meaning that the marriage must be lawful based on state law. The District of Columbia and the following 13 states currently recognize same-sex marriage as legal: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington. (Some of these states have laws that will take effect soon.)
Q&B Key: Under Section 2 of DOMA (which was not challenged in Windsor), states are not required to recognize same-sex marriages that occur in other states. It is unclear whether a same-sex couple that is married in a state that recognizes such marriages will receive federal benefits after moving (or returning home) to a state that does not recognize such marriages. (Does the law of the state of in which the marriage ceremony occurred or the state in which the couple resides control for federal benefit purposes?)
Complicated Impact of Windsor on Health, Welfare, and Retirement Plans. Windsor raises several considerations for employers with respect to all their benefit plans, including health and welfare plans, retirement plans, and nonqualified deferred compensation plans. The following tables summarize the possible effects on these plans.
Q&B Key: Windsor does not invalidate the state bans on same-sex marriages that currently exist in 35 states. In addition, Windsor does not specifically affect benefits provided to same-sex domestic partners of employees.
Click here to view tables.
Communicating the Changes. Given the large number of possible effects and changes noted above, we suspect many employers will want to explain to employees -- especially newly-benefiting same-sex spouses -- these changes. This is a sound strategy, but employers will likely need to work through some of the legal complications of the Windsor decision. Employers may also need to make some policy decisions. For example, if the employer previously did not cover any same-sex domestic partners under its health plan but now will cover same-sex spouses, does the employer wish to continue excluding same-sex domestic partners? Will such an exclusion create employee relations issues?
Effective Date of Windsor Changes. Windsor did not specifically state when any changes required by its decision will become effective. Nor is it clear whether the decision is retroactively effective. Accordingly, it is unclear how quickly employers must act to implement any changes that need to be made. However, we recommend that employers act as soon as possible to review their plans and make any necessary changes. In addition, employers should contact their insurers, third party administrators, and payroll administrators to determine what steps need to be taken to provide any required benefits to same-sex spouses (such as COBRA rights, pre-tax payment of health benefits, and spousal consent for retirement plan distributions).
As noted above, there are many questions that will need to be answered over the coming weeks and months. Shortly after the Court released its decision in Windsor, the Obama Administration stated that it would work swiftly to revise regulations and provide further guidance.