The Defense of Marriage Act (DOMA) provides a single definition of marriage, as between one man and one woman, for purposes of all federal laws, including the Internal Revenue Code and ERISA. In finding DOMA Section 3, which contains this definition, unconstitutional, the U.S. Supreme Court resolves some issues, but creates many others for a whole host of laws, both federal and state. In addition, the ruling does not affect same-sex domestic partners and civil unions.

President Obama has instructed all federal agencies to begin to apply the ruling to all federal statutes. How quickly those agencies may issue guidance is uncertain. The application to differing state laws raises many questions, especially in connection with employee benefit plans.

Group Health Plans
The recognition of same-sex marriages will require that:

• For purposes of federal income taxes, coverage for same-sex spouses must be provided on a tax-free basis. Employers will no longer be required to impute income to the employee for the value of the coverage,
• The cost of coverage for non-spouse domestic partners and civil union partners who are not tax dependents will continue to be imputed income for purposes of federal income taxes,
• The child of a same-sex spouse may be the employee’s child for purposes of federal income taxes. Prior IRS guidance regarding dependency status in community property states is no longer applicable,
• An employee will have HIPAA special enrollment rights to add a new same-sex spouse or dependent acquired by a marriage or to add a same-sex spouse due to his or her loss of other coverage,
• COBRA must be offered to same-sex spouses,
• Participants in cafeteria plans under Code Section 125 must be permitted to pay for coverage provided to a same-sex spouse on a pre-tax basis,
• Participants with health flexible spending accounts, health reimbursement arrangements and health savings accounts must be permitted to pay for eligible expenses incurred by same-sex spouses on a tax-free basis.

Qualified Retirement Plans
Same-sex spouses will have the same rights as opposite-sex spouses to qualified retirement plan benefits, so that:

• A same-sex spouse will be the default beneficiary and will be required to provide appropriate spousal consent to allow the participant to name a non-spouse beneficiary,
• A same-sex spouse is eligible to receive a pre-retirement survivor annuity provided under a defined benefit pension plan,
• A same-sex spouse will be required to provide spousal consent for a participant’s election of a form of payment other than the qualified joint and survivor annuity or for commencement of a pension benefit prior to normal retirement age,
• Qualified retirement plan benefits of a participant and same-sex spouse will be subject to division pursuant to a QDRO,
• The calculation of required minimum distributions will need to recognize same-sex marriages,
• A same-sex spouse will be permitted to roll an eligible rollover distribution from a tax-qualified retirement plan to the spouse’s own IRA or a retirement plan of the spouse’s employer.

More to Come
The U.S. Supreme Court ruling leaves a number of difficult issues for employee benefit plan sponsors and plan administrators. Among those questions are:

• Are group health plans required to provide coverage to same-sex spouses?
• Whether and to what extent should same-sex marriages be recognized for same-sex couples who validly marry in a state then move to another state that does not recognize same-sex marriages?
• When must plan sponsors and plan administrators change their treatment of benefits provided to same-sex spouses?
• Will any retroactive changes be necessary?

Action Items
All plan documents need to be reviewed to determine whether changes are required to the definition of spouse. In addition, all collateral materials (e.g., SPDs, distribution forms, beneficiary designation forms, annual enrollment materials, payroll information, and handbooks) need to be updated to remove distinctions between same-sex and opposite-sex spouses, but may need to add distinctions between same-sex civil union and same-sex domestic partners.