In a closely watched and eagerly anticipated decision, the Supreme Court, in United States v. Windsor, __ U.S. ___ (June 26, 2013) has overturned Section 3 of the Defense of Marriage Act (DOMA) which limited the definition of marriage for federal law purposes to "only a legal union between one man and one woman as husband and wife." Writing the majority opinion for a 5-4 divided Court, Justice Anthony Kennedy noted that the regulation and definition of marriage has historically been within the authority and jurisdiction of state government. In the matter before the court in Windsor, the State of New York had enacted legislation recognizing the legal right of same-sex couples to marry. In this context, Justice Kennedy wrote that DOMA -- which by its design and terms was intended to interfere with the dignity of state sanctioned same-sex marriages by depriving those couples of equal treatment under federal law -- violates the basic due process and equal protection principles of the Fifth Amendment of the Constitution.^[1] A copy of the majority’s decision as well as the three dissenting opinions can be accessed here.

Pollsters, strategists, and religious and philosophical leaders will, no doubt, weigh in on the ramifications of this week’s decisions. In the meantime, employers will need to start thinking about the real world implications of the court’s decision.

• What State Law Controls? With the uniform mandate of Section 3 of DOMA now eliminated, employers will face a patchwork of state laws which must be accessed when determining an employee’s marital status. A relevant inquiry will include not only whether the employee’s state of residence recognizes same-sex marriage, but alternatively whether that state law recognizes any valid marriage obtained outside of the state. What will be the impact of inter-company transfers for employers with multi-state facilities? What about employees in a multi-state metropolitan area who work in one state but reside in another?
• Benefits Plan Administration. The Employee Retirement Income Security Act of 1974 (ERISA) confers special spousal rights and protections with regard to retirement benefits. These rights include spousal approval of pension benefits payable other than as a joint and survivor annuity, and spousal consent to alternate beneficiaries under 401(k) plans and other defined contribution plans. Given that one of the expressed goals of ERISA is to foster uniform rules for benefits plan administration, can/should the Department of Labor and the Department of Treasury consider expanding spousal protections to cover not only legally married individuals, but also other relationships? What -- if anything -- should plan administrators do about situations where spousal rights were not extended to same-sex couples in the past because of DOMA?
• COBRA Continuation and Tax Treatment of Group Health Plan Coverage. Employers that have previously chosen to make group health plan coverage available for an employee’s same-sex partner will now be faced with new administrative issues. Group health benefit continuation rights following an employee’s loss of coverage as a result of job loss or other qualifying events (referred to as "COBRA" continuation coverage) must be made available to the spouse of a covered employee. COBRA continuation rights generally do not extend to non-spousal partners. Thus, group health plan administrators will again need to wade into the morass of applicable state law to assess any rights to benefits continuation based on marital status. Moreover, the Internal Revenue Service has previously held that employer-provided health plan coverage to same sex partners (regardless of marital status under state law) is a taxable benefit to be reported as compensation to the employee. Assuming that, post-Windsor, the tax treatment will now depend on the recognized legal status of the relationship, how should the value of coverage provided prior to the court’s vitiation of DOMA be reported for income tax and employment tax purposes? Additionally, employers who have previously limited group health plan coverage to employees and their eligible dependents for health care purposes will need to determine how the Windsor decision will impact the eligibility status of same sex spouses.
• Dependent Care Assistance Programs and Health Savings Accounts. The Internal Revenue Code annual limits on dependent care assistance plan benefits and health savings account contributions vary depending on whether a taxpayer is married. Employers that make these vehicles available to employees will need to determine how the court’s decision and its impact on the recognized marital status of employees may affect the impact the 2013 annual limitations under those arrangements.

The Department of Labor and the Internal Revenue Service previously have sought to provide guidance to same sex couples. Most recently, the IRS updated its "Answers to Frequently Asked Questions for Same Sex Couples" effective May 30, 2013. These government agencies will now face additional pressure to provide guidance with regard to same-sex couples reflecting the demise of DOMA. We will continue to monitor that guidance as it becomes available and will provide further updates, either through additional Executive Alerts or through our on-going Benefits Broadcast series. In the meantime, plan administrators must endeavor to operate benefit plans in accordance with their terms and in a manner consistent with the holding in the court’s decision.