The U.S. Supreme Court Finds a Constitutional Right to Same-Sex Marriage: Implications for Employee Benefit Plan Sponsors

by Proskauer - Employee Benefits & Executive Compensation Blog
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On June 26, 2015, the U.S. Supreme Court issued a historic decision in Obergefell v. Hodges, holding that the Fourteenth Amendment’s Due Process and Equal Protection Clauses require states to allow same-sex marriage and to recognize same-sex marriages performed in other states.  The decision comes exactly two years to the day from the Court’s decision in Windsor defining “spouse” to include same-sex spouses for purposes of federal law.

As a result of the Court’s decision, the existing 14 state bans on same-sex marriage are invalid, and same-sex spouses are entitled to all of the rights extended to opposite-sex spouses under both federal and state law. 

From an employee benefits perspective, it appears that Obergefell may most significantly impact sponsors of insured health and welfare plans in states that currently ban same-sex marriage.  Employers and other plan sponsors in those states will be required to offer insured benefits to same-sex spouses because state insurance law will require that the term “spouse” be interpreted to include them.  Based on government guidance issued following the Windsor decision, it seems unlikely that the decision would have retroactive effect, though such claims are possible.

For sponsors of self-insured benefit plans, a question may exist as to whether Obergefell directly impacts a sponsor’s decision not to provide health coverage to same-sex spouses (because state law does not apply to such plans).  However, it would appear that there would be heightened risks under federal and state discrimination laws for plans that define “spouse” in a manner that is inconsistent with the federal and state definitions, particularly since the Court held that marriage is a fundamental right under the Constitution, and an ERISA preemption defense likely would be weaker in this new climate.

It is also noteworthy that, as a result of the Court’s decision, there will no longer be imputed income for state tax purposes with respect to employer-provided health coverage for same-sex spouses, allowing for consistent administration in all states in which an employer operates.  Since Windsor, there have not been federal tax consequences with respect to these benefits, but some states continued to impute income for state tax purposes.

Finally, with respect to federally-regulated benefits such as qualified retirement plans and Code Section 125 benefits (for example, flexible spending accounts), the Court’s decision does not necessarily warrant any change, since those plans have been required, since Windsor, to recognize same-sex spouses.  Of course, plan language should be reviewed for consistency with the decision, and employers in some states may find that there are new spouses seeking benefits under those plans.  There also will be some administrative and enrollment issues, similar to when Windsor was decided.

Employers, particularly those operating in states that currently ban same-sex marriage, should review their benefit plans and policies and consider whether any changes need to be made in light of Obergefell.  Some employers may also reconsider their domestic partner benefits programs now that same-sex couples have the right to marry and have their marriage recognized across the entire country.

We expect that there will be guidance from the U.S. Department of Labor and the Internal Revenue Service regarding the employee benefit plan issues that emanate from Obergefell, so stay tuned.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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