Two years after recognizing same-sex marriages for purposes of federal law, the U.S. Supreme Court has gone a step further, requiring that all states recognize same-sex marriages as valid if they were valid in the jurisdiction where they were performed. Further, states are required to license same-sex marriages no differently than opposite sex marriages. In short, the Supreme Court struck down existing state bans on same-sex marriage.
Effect on 401(k) Plans and Other Qualified Plans: 401(k) and other qualified retirement plans are not impacted by Obergefell, since the previous Windsor decision, along with guidance issued by the IRS following Windsor, already required qualified retirement plans to recognize same-sex spouses. Following Windsor, same-sex marriages were to be treated no differently than opposite-sex marriages for all purposes, including automatic survivor benefits (spousal annuities), determining hardship withdrawals, and qualified domestic relations orders (QDROs)).
Effect on Medical Plans: Sponsors of insured medical plans are bound by the terms of the insurance contract – and therefore have little discretion on the matter of same-sex coverage. The providers must write their policies to comply with applicable state law and the plan sponsor buys the policy subject to those terms.
On the other hand, self-funded medical plans may define their own terms. They are governed by ERISA, and as such, state law is largely preempted. Accordingly, any state requirement that the plan cover same-sex spouses may be preempted. Moreover, there is no federal law which mandates coverage of spouses (although if it did, “spouse” would include a same-sex spouse). In the absence of a federal law requiring coverage for spouses, a plan sponsor may still choose whether or not to cover some or all spouses — although treating same-sex spouses differently than opposite-sex spouses is not without risk. There have been a number of challenges asserted with respect to plans which do not provide same-sex coverage and those challenges are likely to escalate. In short, while the Obergefell decision does not on its face compel same-sex spousal coverage under self-funded medical plans, the decision coupled with the trend of legal developments in this area creates an increased level of exposure for employers who offer spousal coverage for opposite-sex spouses but not for same-sex spouses.