On June 30, 2014, same-sex domestic partnerships registered with the Washington Secretary of State will automatically convert to lawful marriages, unless one of the partners is age 62 or older, or the domestic partners have filed for a dissolution, legal separation, or annulment prior to that time. The automatic conversion applies only to domestic partner registrations with the Washington Secretary of State and does not apply to domestic partnerships registered in cities, counties, or other states. HR departments should act now to ensure employee benefit plans are administered correctly following the conversion.
What should employers do to prepare?
The first step is to figure out how many of your employees are affected. We recommend a communication to employees explaining the conversion, and that employees must inform human resources if the change affects them. Employers should administer this change in the same manner as any other notification of marriage.
Can I ask for proof of conversion?
Yes, but you should do so only if you require this of opposite-sex married couples. Employees can obtain an official marriage certificate from the Washington State Department of Health.
What does the conversion mean for retirement plans?
Same-sex spouses have the same rights as opposite-sex spouses, so that, for example, a same-sex spouse:
- Must consent to any beneficiary designation other than for the same-sex spouse.
- Has spousal rights under the annuity rules.
- Must consent to loans under plans subject to the annuity rules.
- Has more favorable treatment under the required minimum distribution rules regarding timing and value of benefits.
- May roll over benefits to the same-sex spouse’s own IRA or another retirement plan.
- Has alternate payee status under a qualified domestic relations order without being a participant’s dependent.
- May experience an event that qualifies the participant for hardship distributions from a defined contribution plan.
What happens to existing beneficiary designations under retirement plans?
As of June 30, existing non-spouse beneficiary designations made by affected employees will no longer be valid. To preserve those non-spouse designations, the employee must complete a new designation form, with the new same-sex spouse’s consent. For example, assume an employee named his or her child as primary beneficiary under his or her employer’s qualified retirement plans, and as of June 30 his or her Washington state registered domestic partnership converts to marriage. The effect of the conversion is that the new spouse automatically becomes his or her beneficiary, and the former designation of his or her child as primary beneficiary is no longer valid. To reinstate the former beneficiary designation, the employee must re-submit the form with his or her child named as primary beneficiary, and have his or her new spouse provide the appropriate consent. Employers should communicate this to employees, so they realize they may need to take action to preserve their former beneficiary designations.
What does the conversion mean for health and welfare plans?
The same-sex spouse may receive health benefits on a pre-tax basis and will be eligible for special enrollment rights under the employer’s group health plans.
Are employers required to provide health and welfare benefits to same-sex spouses?
If you have an insured plan, yes. In these FAQs, the Washington State Attorney General’s Office takes the position that even self-insured plans covering opposite-sex spouses must cover same-sex spouses. As discussed in a previous advisory, self-insured plans subject to ERISA are not subject to state laws because of ERISA preemption, and ERISA does not require those plans to provide coverage to same-sex spouses. While the reasoning in the FAQs is logical (i.e. Windsor struck down a federal law that disadvantaged legal same-sex spouses, so ERISA could not possibly allow a plan to carve them out for welfare benefits), this is not necessarily true under current law. In a recent federal trial court case (Roe v. Empire Blue Cross Blue Shield) the employer offered coverage to opposite-sex, but not same-sex, spouses under a self-insured health plan, with the court confirming that this was not a violation of ERISA. The court did not address ERISA preemption because the plaintiffs actually alleged that ERISA was violated, so it remains to be seen where the case law will lead. For the moment, employers could choose to provide health and welfare benefits to opposite-sex spouses under a self-insured plan, and not offer them to same-sex spouses, but they are likely to face discrimination lawsuits, equal protection arguments under federal law (which are not preempted by ERISA), and challenges under state law, which may be preempted but will have little consequence if federal equal protection arguments prevail.
Why is this happening?