Illinois' new Illinois Religious Freedom Protection and Civil Union Act (Civil Union Act) went into effect on June 1, 2011. The Civil Union Act permits both same-gender and different-gender couples to enter into Illinois civil unions and also recognizes as Illinois civil unions same-gender marriages, civil unions, and other similar legal relationships entered into in other states. Illinois is now one of 22 jurisdictions in the United States that extend state-level spousal rights to same-gender couples. The Civil Union Act gives individuals entering into civil unions the same protections, obligations, responsibilities, and benefits afforded to different-gender spouses under Illinois law. Because these rights and protections extend to certain employee benefit plans and policies, Illinois employers need to understand how the Civil Union Act affects their plans' operations.
Application of the Civil Union Act. As noted above, for purposes of Illinois law, civil union partners must be treated identically to married spouses. The Civil Union Act provides that this requirement should be “liberally construed and applied to promote” the Act's principle of equality. As a result, if an employer's health plans are subject to Illinois law, any benefits provided to married employees under those plans also must be extended to employees who have entered into civil unions.
According to guidance issued in May 2011 by the Illinois Department of Insurance (DOI), all insurance policies (including health insurance policies and/or HMO contracts) in effect on June 1, 2011 were automatically amended by operation of law to conform with the Civil Union Act. Health insurance policies issued in Illinois on or after June 1, 2011 also must comply with the requirements of the Civil Union Act.
Under the DOI guidance, employers offering health benefits to their employees through group health insurance policies and/or HMO contracts issued in Illinois must offer civil union partners and their families the same coverage offered to married couples. That is, if an employer's health insurance provides for coverage of an employee's spouse, it also must provide coverage for an employee's civil union partner. Likewise, if the policy provides for coverage of a spouse's children, it also must provide such coverage to the civil union partner's children. The rates charged for two-person (spousal) or family coverage cannot differ based on whether the family consists of married spouses or civil union partners.
Because state regulation of self-funded health plans is preempted by ERISA, the Civil Union Act does not require employers maintaining such plans to extend spousal or dependent benefits to employees in civil unions. Such employers may, however, voluntarily provide coverage for their employees' civil union partners and their children.
When may civil union partners be added to a plan? Under certain circumstances, an employee may be eligible to immediately add his or her civil union partner to an Illinois employer's insured health plan. If the Civil Union Act applies to the employer's insured group health plan, and if the plan provides for the coverage of spouses, then an employee may add coverage for his or her civil union partner: (i) during the plan's annual open enrollment period; or (ii) during the 30-day “special enrollment period” beginning when the employee's civil union becomes effective or when the employee's civil union partner loses other coverage. In addition, employees who entered into same-gender marriages, civil unions, or other such relationships in other states prior to June 1, 2011 will be eligible to enroll their civil union partners during a 30-day special enrollment period beginning on June 1, 2011.
Continuation coverage. Due to the operation of the federal Defense of Marriage Act (DOMA), Illinois civil unions are not recognized for federal purposes. As a result, an employee's civil union partner will not have continuation rights under COBRA in the event the employee loses his or her medical coverage, retires, dies, or divorces the civil union partner. Nevertheless, under certain circumstances, civil union partners may be eligible for continuation coverage provided under Illinois law (through Illinois' “mini-COBRA” program).
Tax treatment. Illinois civil unions are not recognized for federal tax purposes (again, because of the application of DOMA). Accordingly, the value of any coverage provided to an employee's civil union partner and his or her children will, unless the partner or child is otherwise a federal tax dependent of the employee, need to be included in the employee's gross income, and is subject to federal income tax and applicable payroll taxes. The value of the coverage will not, however, be included in the employee's income for Illinois state tax purposes.
Other Insurance Coverage
Life insurance. Because civil union partners are treated the same as married spouses for purposes of Illinois law, they will be treated as having an “insurable interest” in the life of their partner (that is, they will be treated as having suffered financial or other losses in the event of their partner's death). As a result, a civil union partner may purchase life insurance covering his or her partner's life. Accordingly, if an employer's group life insurance policy permits an employee to purchase life insurance coverage for his or her spouse, an employee must be offered the ability to buy similar coverage for his or her civil union partner.
Long-term care insurance. Under the Civil Union Act, long-term care policies issued in Illinois must provide benefits to civil union partners that are identical to those provided to married spouses. Accordingly, a civil union partner may designate his or her partner as a “spouse” for purposes of spouse survivorship benefits, spouse waiver of premiums, spouse security benefits, spouse-shared care benefits, and other similar benefits offered under a long-term care policy.
Medicare coverage. Due to the operation of DOMA, civil union partners are not recognized as spouses for purposes of Medicare coverage. As a result, civil union partners with less than 10 years of Medicare-covered employment may not use their partner's employment history in order to establish eligibility for Medicare Part A.
The Civil Union Act does not require non-governmental employers offering retirement plans to their employees — i.e., defined contribution plans (401(k), profit-sharing plans, and so forth) and defined benefit pension plans — to provide spousal benefits to civil union partners since those plans are solely governed by federal law. However, pension funds created by Illinois law, such as pension funds for police officers and firefighters, are subject to the Civil Union Act. As a result, civil union partners are entitled to all the same benefits (such as survivor benefits) and are subject to all the same obligations (relating to the length of the relationship) under those funds as are married spouses.
Other Benefit Arrangements and Employee Policies
Given the reach of the Civil Union Act, Illinois employers should keep in mind that other employment policies and agreements, in addition to those discussed above, may be affected. For example, employment contracts that provide benefits to married spouses also may need to provide the same benefits to civil union partners. In addition, leave of absence policies based on health of a spouse or children, or leaves that are required by Illinois law, also may apply to civil union partners and the children of those partners.
What Employers Should Do Now
Illinois employers should review their benefit plans and employment policies to determine whether benefits currently offered to married spouses also must be offered to civil union partners. If so, the benefit plans (and their summary plan descriptions) and policies should be revised to reflect these new rights. Employers also may want to notify Illinois employees about any special enrollment periods that the employees may have under insured benefit plans. Employers also should keep in mind that different tax treatment may apply for federal and state purposes to the provision of such benefits, so human resources personnel will need to discuss these new rules with their payroll departments or vendors to ensure that the tax treatment of benefits is being properly managed.