Yesterday’s U.S. Supreme Court ruling striking down the provision of the Defense of Marriage Act (DOMA) defining marriage as a union between one man and one woman for federal benefits purposes, opens the door for married same sex couples to be eligible for federal benefits, including tax favored treatment of group medical benefits.
Previously, employers had to deliver troubling news to employees who had their same-sex spouses covered under the employer plan—that the value of the benefit for that same-sex spouse was included in the employee’s taxable income (since it did not qualify as a non-taxable benefit under DOMA).
How Does the Ruling Affect Employee Benefit Plans?
But for organizations looking for a roadmap with respect to how they need to structure employee benefit plans, the ruling raises more questions than answers. For example, while the ruling defines marriage to include same sex marriage as defined by the individual states, it does not mandate that the states take any particular steps and leaves open several questions. Moreover, it does not say anything with respect to domestic partnerships or civil unions. Presumably, those relationships are not marriages so the same tax and coverage issues as currently apply may still apply to those “non-marriage” relationships.
Which States Are Affected?
Key questions remain, including whether this applies to employees resident in all states or just those that permit same sex marriage (or recognize same sex marriages from other states), how this applies to “spousal” rules in general for benefits like consent requirements in 401(k) or other qualified retirement plans, or default provisions of other plans that often provide for spouses.
For now, my advice for companies is to monitor the regulatory agencies and their rule-making as many of these questions have yet to be settled.
Read Willis’ National Legal Research Group News Flash on the ruling. News Flash: June 26, 2013 – U.S. Supreme Court Rules DOMA Unconstitutional