New Jersey’s Recognition of Same Sex Marriages Impacts Leave, Benefits and Tax Laws

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The New Jersey Supreme Court’s recent decision to legalize same-sex marriage will have an impact on several federal and state employment statutes. In September 2013, New Jersey Superior Court Judge Mary Jacobson ruled in Garden State Equality v. Dow that the state must allow same-sex couples to marry beginning on October 21. 2013 N.J. LEXIS 1091 (N.J. Oct. 18, 2013).  Governor Christie immediately appealed the decision to the New Jersey Supreme Court and also requested a stay of execution.  The Supreme Court unanimously upheld the trial court’s ruling. On Monday, October 21, Christie dropped his legal challenge to same-sex marriage.  This makes New Jersey the fourteenth state, along with the District of Columbia, to allow same-sex couples to marry.  This development, along with decisions from the IRS and Department of Labor over the last few months, have had major effects on leave, benefit and tax laws for New Jersey employees.  New Jersey employers should examine their leave policies and benefit plans to ensure that they comply with new federal and state laws.

Family Medical Leave Act

The Family Medical Leave Act (“FMLA”) entitles covered employees to up to twelve weeks of leave during any twelve month period for the serious health condition of the employee or certain family members.  On August 13, 2013, the Department of Labor issued a fact sheet that clarified that in light of the U.S. Supreme Court Case United States v. Windsor, 570 U.S. ___ (2013), the FMLA definition of “spouse” includes same-sex spouses when an individual resides in a state that recognizes same-sex marriage.  Now that same-sex marriage is legal, employees may take family leave to care for a same-sex husband or wife.  The New Jersey Family Leave Act already allowed covered employees to take up to twelve weeks of leave during any twenty-four month period for the serious health condition of a same-sex civil union partner.

COBRA

New Jersey employers must adjust their benefit plans to provide additional medical and pension benefits to same-sex couples.  The Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) allows a “qualified beneficiary” to stay on his or her spouse’s plan after a “qualifying event” such as the employee losing his or her job.  A same-sex spouse will now qualify as a qualified beneficiary.

Retirement Benefits

On September 18, 2013, the Department of Labor announced that in light of Windsor, the terms “spouse” and “marriage” in Title I of ERISA should be read to include same-sex couples legally married in any state, regardless of where they currently live.  While ERISA covers retirement plans created by most private employers, it does not cover plans established or maintained by government entities or churches for their employees, or plans which are maintained solely to comply with worker’s compensation, unemployment, or disability laws.

Tax Consequences

After the Supreme Court’s ruling in Windsor, the IRS issued a revised rule stating that “spouse” and “marriage” in the Internal Revenue Code should be read to include all same-sex couples legally married in any state.  This means any legally married same-sex couple will be considered married for federal tax purposes, regardless of the laws of their state of residence.  This has a big impact on same-sex couple’s tax liability for employer-based health insurance.  Previously, if a person had health insurance through a same-sex partner’s employer, he or she would have to report the coverage as taxable income. Same-sex couples who are legally married are now able to extend their employer-based health insurance to their spouse without tax repercussions.