July 5, 2013

Supreme Court Opines on Same-Sex Marriage Issues

As is well known by now, on June 26, 2013, the U. S. Supreme Court issued two decisions that may have significant impact on employee benefit plan administration.

In United States v. Windsor, the Supreme Court determined that §3 of the Defense of Marriage Act (DOMA), a 1996 federal law defining marriage as, “a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife”, is unconstitutional as a violation of the Equal Protection provisions of the U.S. Constitution.  What this means is, couples in a same-sex marriage, sanctioned by a state, will have all of the benefits of the federal law. 

Of particular importance in the employee benefit arena is that employees in a same-sex marriage can enjoy all of the federal tax advantages of employee benefits available to opposite sex spouses; and, same–sex spouses can enjoy all of the benefits of laws, such as COBRA, available to opposite sex spouses. 

It is very important to note that this ruling only applies to same-sex marriages; it does not apply to domestic partnerships, civil unions, or other types of relationships.  Nor does it provide a universal definition of marriage to include same-sex couples.  In other words, a state retains the right to define marriage as it deems appropriate.  

Which brings us to the second matter, Hollingsworth v Perry.   This case resulted from a California circumstance in which the Legislature passed a same-sex marriage provision that was overturned by a voter referendum (Proposition 8) six months later.  As a result, same-sex marriage was only sanctioned in California for six months.  The voter referendum was challenged; and the challenge was taken to the Supreme Court.  The Supreme Court opined that it did not have jurisdiction to hear the case and returned it to the California Appeals Court for disposition.  What this appears to mean is that same-sex marriage is not sanctioned at this time; though, many anticipate that this will be reversed quickly, perhaps even within the next several weeks. 

While there are many unanswered questions as a result of these decisions, let’s begin with what we do know.

What We Know

  •  We do know that the following states recognize same-sex marriage:

States with Same-Sex Marriage Laws




Minnesota (effective 8/1/13)

Delaware (effective 7/1/13)

New Hampshire

District of Columbia

New York


Rhode Island (effective 8/1/13)





 With regard to California, the 9th Circuit Court of Appeals Court lifted the stay restricting same-sex marriage on June 28, 2013, allowing same-sex marriages to resume.

  • Taxes and Benefits. In the 13 jurisdictions listed above, a same-sex marriage must be treated in the same way as an opposite-sex marriage, both for state and federal tax law purposes.  This means that same-sex spouses in these jurisdictions can receive tax-favored participation in health and welfare benefit plans, including flexible medical spending account plans, health savings accounts, and health reimbursement arrangements. 

The employer paid health coverage provided to the employee and the employee’s tax dependent, including spouses, is excludable from the employee’s income.  With the recognition of same-sex spouses for federal tax purposes, spouse will include same-sex spouse in 13 jurisdictions listed above.  What is unclear is whether the tax advantage would be based on the place of marriage or the place of residence.

Internal Revenue Code Section 125 allows employers to offer a Section 125 cafeteria plan through which the employee paid portion of his/her coverage can be paid on a pre-tax basis.  This would similarly apply to same-sex spouses.

Same-sex spouses will also be entitled to survivor benefits, spousal beneficiary designations and other consent requirements under retirement plans; and same-sex spouses will be afforded the benefits of HIPAA portability and the Affordable Care Act, as well as entitlement to leave benefits pursuant to the Family and Medical Leave Act.

At this point, jurisdictions that do not recognize same-sex marriage do not have to recognize a same-sex marriage entered into in another jurisdiction.  For states with “mini-DOMA” laws, see the map of State Defense of Marriage Acts and Same-Sex Marriage Laws from the National Conference of State Legislatures.  It is certainly possible that this issue will be challenged.

What We Don’t Know

  • Governance of law. What law governs – the state where the marriage took place or the state of residence?  What will be an employer’s obligation to a couple married in a state permitting same-sex marriage but living or working in a state that does not?  Justice Kennedy, writing for the majority in the Windsor decision, observed that Section 2 of DOMA, which allows states to refuse recognition of same-sex marriages performed under the laws of other states, was not part of the case being decided by the Court and therefore continues to be the law.  House Democrats introduced a bill on June 26th to repeal Section 2 of DOMA.
  • Timing. With regard to the applicability or timing of the many aspects of the Supreme Court’s decisions, it is unclear how or when many of these new requirements will be applied.  Will an individual be able to claim COBRA for a qualifying event occurring on June 15th?  Or an individual be allowed a survivor benefit for a death occurring in April?  When will tax-favored status be afforded health coverage?  So many questions, and so few answers.  The various government agencies have been directed to issue guidance as quickly as possible.  It may be that we get guidance that allows tax-favored status retroactive to the beginning of the tax year; or, it may be that individuals will be able to seek a refund for open tax filing years (this should not be an employer’s concern).  It may be that an employer can likewise seek a refund of its portion of FICA expenses.
  • Enrollment and Eligibility Issues. Another question is, if same-sex spouses have not previously been allowed to enroll in benefits, will there be a special enrollment event, or will they have to wait until open enrollment? This is a bigger issue for self-funded plans that have been able to define “spouse” without regard to state law.  Generally, insured plans have had to follow state law definitions, and therefore, same-sex spouses have been treated equally for eligibility purposes as opposite-sex spouses in those states recognizing same-sex marriage. 

What Should and Employer Do?

  • Employers employing employees in the above-listed states should begin reviewing their definition of “spouse” in all of their health and welfare benefit plans, as well as their pension or retirement plans, and other employment policies including but not limited to leave policies with particular emphasis on what changes need to be made to accommodate the new federal definition of spouse.  For example, if a health or retirement plan has defined spouse in accordance with DOMA, this language would need to be modified.
  • If a plan includes relationships such as domestic partnerships and civil unions, as well as marital relationships, the employer will want to be prepared to treat these relationships properly based on the inclusion of the new definition of federally-defined spouse.

At this point, and to the degree the employer can, it is probably best to wait for official guidance before making any significant changes to plans and policies and procedures.  In other words, the employer should be in an information-gathering mode so that when guidance is issued, employers will be best poised to act efficiently. 



The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.