The US Supreme Court’s 5/4 decision on June 26, 2013 in United States v. Windsor 570 U.S. _____ (2013) struck down as unconstitutional Section 3 of the Defense of Marriage Act (“DOMA”). Enacted in 1996, DOMA defined “marriage” as meaning only a legal union between one man and one woman, and “spouse” as meaning only a person of the opposite sex.  The Windsor case involved a claim for refund of federal estate taxes by a surviving same-sex spouse who was precluded from claiming the spousal estate exemption by Section 3 of DOMA.  The Supreme Court declared Section 3 of DOMA unconstitutional under the Due Process and Equal Protection provisions of the 5th Amendment.

While the Windsor decision clearly invalidated Section 3 of DOMA, the decision did not address how federal laws would be applied to individuals married in a state which allows same-sex marriage, but resident in a state that does not.

IRS Revenue Ruling 2013-17 and DOL Technical Release 2013-04

The answer for federal tax purposes came in late August when the Internal Revenue Service issued Revenue Ruling 2013-17 and held that a same-sex marriage which is recognized as legal in the state or jurisdiction of celebration, will be recognized for all federal tax purposes.  “Jurisdiction” includes a foreign jurisdiction (like Ontario, Canada where the couple in Windsor were married) where a same-sex marriage is legal.  This means that same-sex individuals legally married in a state which recognizes same-sex marriage will be treated as legally married for federal tax purposes even if they later live in a state that prohibits same-sex marriage.

In contrast, the IRS ruled that same-sex individuals in civil unions or domestic partnerships will not be treated as validly married for federal tax purposes.  This ruling became effective on September 16, 2013.

On September 17th, the DOL issued Technical Release 2013-04 holding that for purposes of benefit plans subject to ERISA, the DOL would follow the “state of celebration” rule. 

As of today, 13 states and the District of Columbia recognize same-sex marriages by state constitution or statute.  Our Same-Sex Marriage Laws in the United States Chart can be used as a resource which identifies the current status of each US state and the District of Columbia, including those US jurisdictions that have recognized civil unions and domestic partnerships. 

Immediate Action Required of Employers

Determining Who is Married for Benefit and Payroll Purposes

It would be prudent for employers, to determine who of their employees are in marriages the employer may not be aware of, so that the employer can comply with legal requirements in administering various plans, securing required consents and reporting income and withholding payroll appropriately.   We would be pleased to work with you on the best means for obtaining this information, modifying your plans administration so that you do not raise a collateral discrimination issue in attempting to implement these changes.  

For specific plan issues requiring immediate employer attention, please read on…

Retirement plans:

As of September 16, 2013, retirement plans must be administered in accordance with this new definition, even if your plan document provides otherwise.  For example, in a 401(k) Plan the spousal consent rules for same-sex spouses now apply for distributions upon death, the validity of beneficiary designations and participant loans. In defined benefit plans a same-sex spouse must now be provided a qualified joint and survivor annuity, a qualified pre-retirement survivor annuity and must consent to any form of benefit other than an annuity, and to any beneficiary designation other than the spouse. 

Health Plans:

Unlike retirement plans, healthcare (medical) plans, sponsored by employers are not obligated to offer spousal coverage.  In fact a minority trend not to offer spousal coverage can be seen in some recent high profile companies (notably UPS) which is choosing not to offer coverage to spouses of a segment of their workforce, if those spouses have coverage available through their employer.  Consequently the current thinking is that employers who have not historically offered coverage to same-sex spouses are not obligated to do so – however, there may be local laws that preclude discrimination against a same-sex spouse so excluding same-sex spouses may carry significant risk.  Further if your plan is fully insured state insurance laws will typically be the driver, imposing a significant burden on employers operating in multiple states.   If the healthcare plan is self insured there may be more design flexibility. 


With respect to medical benefits, whether insured or self-insured it is critical for employers who currently offer medical coverage to same-sex spouses, to recognize they must now give COBRA notices to same-sex spouses on the occurrence of a qualifying event.  In addition if the cost of same-sex spouse coverage is paid for by the employee it is now permissible to do so with pre-tax premium deductions under a 125 Plan.  

Payroll Taxes

Payroll departments have two methods to correct for 2013, the over reporting and withholding of income and payroll taxes resulting for payment of a same-sex spouse’s healthcare benefits, which was previously required to be reported as after tax payments.  The IRS announced that they would provide further guidance on retroactive impact and the opportunity for employers to seek payroll refunds for prior open periods.  The IRS addressed the 2013 adjustment methods as well as the general opportunity to seek refunds or credits for prior periods in Notice 2013- 61, but further guidance relating to prior periods has been promised.

The issues addressed in this ALERT are developing rapidly with several lawsuits having been filed, and even several settled following the Windsor decision – so keep checking our website for further developments, and be sure to check the Same-Sex Marriage Laws in the United States Chart for their current laws relating to same-sex marriage. This isn’t the only issue, however.  For example, it remains to be seen whether employers will be required to revisit previously paid benefits or benefits currently in pay status based on this revised definition of marriage and spouse.

Continuing Lack of Uniformity in Approach Even for Federal Law Purposes

The DOL ruling on benefit plans is not uniform for federal purposes as both the Social Security Administration and the Family Medical Leave Act rules continue to look to state of residence and not the state where the marriage was celebrated.  The DOL is continuing to take a fair amount of criticism for this inconsistency.

Fennemore Craig will be hosting a complimentary seminar to address these issues on Wednesday, October 23rd, please Click here to view invitation and RSVP for the Same-Sex Marriage Seminar