Employee Benefits for Same-Sex Spouses

Todd Solomon
July 24, 2009 — 1,989 views  
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2009 has been a year of dynamic change in the ongoing debate over same-sex marriage.  As 2008 drew to a close, same-sex couples could legally marry only in Massachusetts and Connecticut and over 18,000 same-sex couples who had legally married in California before the state constitution was amended to ban same-sex marriage awaited a ruling from the California Supreme Court on the continued validity of their marriages.  Now, only eight months later, same-sex marriage has been legalized in four more states and the outcome of the uncertain legal status of same-sex marriage in California has been determined.

2009 State Law Developments

California

In June 2009, the California Supreme Court upheld the validity of a state constitutional amendment banning same-sex marriage.  Same-sex marriage had been legal in the state for nearly five months in 2008 after the Court ruled in May 2008 that the state constitution grants same-sex couples the same right to marry as opposite-sex couples.  A slim majority of California voters approved the controversial amendment ("Proposition 8") to the state constitution in November 2008, which defined marriage as a union between a man and a woman.  Although same-sex marriage is now banned in the state going forward, the Court ruled that the over 18,000 same-sex marriages performed between June 17 - November 3, 2008 will continue to be valid and recognized for all purposes of California law.

Connecticut

In April 2009, the Connecticut legislature codified the state Supreme Court's ruling that the state constitution grants same-sex couples the right to marry.  The new gender-neutral laws replaced the state's existing marriage laws.  Connecticut previously recognized civil unions for same-sex couples; unions that will automatically be converted to marriages on October 10, 2010.

Iowa

Same-sex marriage was legalized in Iowa in April 2009 when the Iowa Supreme Court unanimously ruled that the state law limiting marriage to opposite-sex couples unconstitutionally violated the equal protection clause of the state constitution.  The ruling instructed that all state laws should be read to permit same-sex couples to marry.  The Court's decision took effect and same-sex marriages began being performed in Iowa on April 24, 2009.

Maine

A law to legalize same-sex marriage was approved by the Maine legislature in May 2009.  The law was expected to take effect on September 11, 2009; however, it may now be put on hold pending the outcome of a referendum on same-sex marriage on the November 2009 ballot.

New Hampshire

The New Hampshire legislature passed a law legalizing same-sex marriage in the state in June 2009.  The new law will take effect on January 1, 2010.  New Hampshire previously recognized civil unions for same-sex couples; civil unions that will automatically be converted to marriages on January 1, 2011.

Vermont

Vermont became the first state to legalize same-sex marriage by legislative action when the state legislature voted in April 2009 to override Governor Jim Douglas' veto of a bill that extends the right to marry to same-sex couples.  Same-sex marriage was previously legalized in Massachusetts, Connecticut, and Iowa by judicial ruling.  The new law will take effect and same-sex marriages will begin being performed on September 1, 2009.  Vermont was the first state to legalize "civil unions" that grant same-sex couples the same rights as opposite-sex spouses but without the title of "marriage."  The state will continue to recognize civil unions entered into before September 1, 2009, though no new civil unions will be permitted once the same-sex marriage laws take effect.

The District of Columbia

The District of Columbia City Council voted in May 2009 to recognize same-sex couples legally married in other states as spouses under District law.  The new law took effect on July 7, 2009.  Although same-sex marriages cannot be performed in the District, same-sex couples can register as domestic partners.  New York is the only other jurisdiction in the United States to officially recognize out-of-state same-sex marriages, even though same-sex marriages cannot be performed there.

Impact on Employee Benefit Plans

The recent state judicial and legislative actions legalizing same-sex marriage have had significant consequences for employers throughout the United States.  Many employers have already taken action to prepare their employee benefit programs to cover same-sex spouses, in anticipation of requests for same-sex spousal benefit coverage from employees who are now wed to their same-sex partners.  Even employers located in states where same-sex marriage has not been legalized are facing increased requests for benefits for same-sex spouses as employees are traveling to states where same-sex marriage has been legalized in order to marry their same-sex partner.  The most common requests by employees for same-sex spousal benefits tend to be for coverage under health and dental plans and spousal survivor annuity coverage under defined benefit pension plans.

Providing benefits for same-sex partners has been a confusing process for employers because federal and state governments have given mixed messages regarding the status of same-sex couples throughout the United States.  Once all of the recent developments have taken effect, same-sex couples will be able to marry in six states, enter into civil unions in New Jersey, or register as domestic partners in California, Hawaii, Maine, Nevada, Oregon, Washington and the District of Columbia.  However, the federal Defense of Marriage Act (DOMA) allows states to refuse to recognize same-sex marriages performed in other states.  In addition, 40 states have laws or constitutional provisions (often called mini-DOMAs) prohibiting the performance of same-sex marriage in their states and the recognition of same-sex marriages performed in other states (Connecticut, Iowa, Maine, Massachusetts, New Hampshire, New Jersey, New Mexico, New York, Rhode Island, Vermont, and the District of Columbia are exceptions).  Some states have offered domestic partner benefits to their own government employees while other states have gone so far as to ban certain employers from offering benefits to employees' domestic partners.  Perhaps even more confusingly, some states have inconsistent rulings, such as New York and the District of Columbia's refusal to grant same-sex marriages while at the same time legally recognizing same-sex marriages performed elsewhere.

Employers must assess their possible obligation to provide same-sex partner benefits by looking at the legality of the marriage based on both the jurisdiction where the marriage was performed and the employee's state of residence to determine whether the marriage will be recognized.  If the employee lives in a mini-DOMA state, the employer does not have to recognize same-sex marriage for plan eligibility purposes, although many employers voluntarily choose to expand eligibility in this situation.  If eligibility is extended, it is considered an optional benefit akin to a domestic partner benefit program.

If the employee resides in a state without a mini-DOMA, the employer may have to recognize same-sex marriage for health plan eligibility purposes, depending upon whether the plan is a self-insured plan or a fully insured plan. Self-insured plans (i.e. plans that pay benefits out of a company's general assets) are governed only be federal law (ERISA and the Internal Revenue Code) and have flexibility to recognize or not recognize otherwise valid same-sex marriages. However, insured plans are subject to state law benefit mandates and may have to recognize same-sex marriages depending upon where the policy is issued.

Todd A. Solomon is a partner in the Employee Benefits Department of McDermott Will & Emery's Chicago office. He is the author of the third, fourth and fifth editions of Domestic Partner Benefits: An Employer's Guide, and was the co-author of the book's first and second editions.

Brian J. Tiemann is a member of the Employee Benefits Department in the Chicago office of McDermott Will & Emery.

Todd Solomon

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Todd A. Solomon is a partner in the law firm of McDermott Will & Emery LLP based in the Firmís Chicago office. As a member of the Employee Benefits Department, Toddís practice is concentrated primarily on designing, amending, and administering pension plans, profit sharing plans, 401(k) plans, employee stock ownership plans, 403(b) plans, and nonqualified deferred compensation arrangements. He also counsels privately and publicly-held corporations and tax-exempt entities regarding fiduciary issues under ERISA, employee benefits issues involved in corporate transactions, executive compensation matters, and the implementation of benefit programs for domestic partners of employees. A portion of his practice consists of advising clients on fiduciary and plan investment matters. Todd has experience counseling plan fiduciaries with respect to investment policies, alternative investments (e.g., hedge funds, limited partnerships, real estate), prohibited transaction issues, investment management agreements, and payment of expenses from plan assets.