Domestic Partners Excluded from Federal COBRA Subsidy

Todd Solomon
June 18, 2009 — 2,443 views  
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The recently enacted economic stimulus bill, titled the American Recovery and Reinvestment Act, includes a federal subsidy for group health plan coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and similar state laws that offer comparable continuation coverage.  The subsidy covers 65% of the cost of COBRA coverage for up to nine months of coverage for employees who were involuntarily terminated at any time between September 1, 2008 and December 31, 2009 and their qualified beneficiaries.  Qualified beneficiaries are identified as spouses and dependent children of the employee.  The subsidy, like COBRA coverage in general, is not available to same-sex spouses or domestic partners since the federal Defense of Marriage Act limits the definition of "spouse" for all purposes of federal law to a person of the opposite sex.  However, many employers elect to provide "COBRA-equivalent" coverage to the domestic partners and/or same-sex spouses of employees.  Informal guidance from the Internal Revenue Service has indicated that premiums for COBRA coverage currently offered by employers to involuntarily terminated employees and their same-sex spouse or domestic partner should be bifurcated to permit the employee to receive the subsidy with respect to his or her own coverage while requiring the employee to pay the full cost of any "COBRA-equivalent" coverage premium for the employee's same-sex spouse or domestic partner.


The Fate of Proposition 8 and Same-Sex Marriage in California


The issue of same-sex marriage returned to the California Supreme Court on March 5, 2009 as the Court heard oral arguments on the validity of Proposition 8, the November 2008 ballot initiative that banned same-sex marriage in California by amending the state constitution to add a new provision stating that "only marriage between a man and a woman is valid or recognized in California."  The Court first opened the door to same-sex marriage just ten months earlier when it ruled on May 15, 2008 that a state statute which limited marriage to opposite-sex couples violated the state constitutional rights of same-sex couples.  The ruling made California the second state at the time, after Massachusetts, to recognize full marriage rights for same-sex partners when the state began performing same-sex marriages in June 2008.  Connecticut subsequently legalized same-sex marriage in October 2008.

With the November 2008 election quickly approaching, opponents of same-sex marriage quickly mobilized and gathered the signatures needed to put Proposition 8 on the ballot.  A slim majority of 52% of voters approved Proposition 8 on November 4, 2008, immediately halting all same-sex marriages performed in the state.  Over 18,000 same-sex marriages were performed in California in the brief five months that same-sex marriage was legal; the legal status of which is now uncertain as the Court has been asked to determine whether Proposition 8 will retroactively act to invalidate all same-sex marriages that were once legally performed within the state.

Supporters of same-sex marriage filed multiple lawsuits challenging the validity of Proposition 8 in the weeks following the November election.  The focus of their arguments comes down to the technical difference between an "amendment" and a "revision" to the state constitution.  They argue that a law defining marriage as a union between a man and a woman is a revision to the state constitution, not an amendment, because it fundamentally changes the state constitution's equal protection guarantees.  State law requires revisions to the state constitution to be approved by at least two-thirds of both houses of the state legislature or by a special constitutional convention before going to voters.  Amendments, on the other hand, can proceed to directly to voters without legislative approval.  The supporters of same-sex marriage argued that the Court must find Proposition 8 invalid because it improperly attempts to amend the state constitution with a change that can only be accomplished through the revision process set forth under state law.  They argued that any attempt to rescind such a fundamental right as the right to marry from a group of individuals that the Court itself identified in its May 15, 2008 ruling as being historically subject to discrimination must be examined with the highest level of judicial scrutiny.

California Attorney General Jerry Brown also urged the Court to declare Proposition 8 invalid, but not because of the amendment/revision distinction.  Brown argued that Proposition 8 attempts to take away an inalienable right from a protected class of individuals who have historically been mistreated under state law without a compelling justification for doing so.  These inalienable rights existed before the mandates of the federal and state constitutions were written and include the right to liberty, a right Brown argued has evolved over time to include the right to marry.  Brown argued that the state can only deny a protected class an inalienable right if the state has a compelling justification for doing so and Proposition 8 lacks such a justification.

One of the most provocative arguments made to the Court came from an attorney representing several of the same-sex couples whose marriages may no longer be legally valid.  He argued that the state must treat all of its citizens equally and if Proposition 8 is going to deny same-sex couples the right to "marriage" then the state should refrain from using the term "marriage" to define any relationships recognized under state law.  He argued that unless the state is willing to recognize marriage on an equal basis for all people, the state should "get out of the marriage business."

Conversely, opponents of same-sex marriage argued that Proposition 8 is a valid amendment to the state constitution.  They argued that the only way for those opposed to the legalization of same-sex marriage to respond to the Court's May 15, 2008 ruling that the state statute limiting marriage to opposite-sex couples was unconstitutional was to amend the constitution itself.  Proposition 8 was drafted and passed in accordance with the procedures set forth under state law to amend the constitution and therefore must declared valid. 

Ken Starr, who argued on behalf of the opponents of same-sex marriage, argued that the fairness of Proposition 8 is not the most important issue before the Court.  Rather, he argued,  Proposition 8 was decided in an "open, fair election" and reflects the will of the majority of California voters.  "The people are sovereign - and can do unwise things."  He urged the Court to consider Proposition 8 in light of the fact that it does not take away the substantial legal protections that remain available to same-sex couples under the state's domestic partnership laws.

The Court is expected to rule on Proposition 8 within 90 days.  Although many legal experts are doubtful that the Court will invalidate Proposition 8 and reinstate same-sex marriage, many believe the over 18,000 same-sex marriages performed in California in 2008 will remain valid.  Of course, the fate of Proposition 8 and the 18,000 plus marriage licenses issued in California before its passage remains to be seen. 


Domestic Partnerships


Regardless of the Court's decision on the validity of Proposition 8, the good news for same-sex couples in California is that the state domestic partnership laws that were first enacted in 1999 have remained in place and are unaffected by Proposition 8.  Although Proposition 8 may deny same-sex couples the right to enter into legal marriages in California, all of the legal rights and protections of marriage are still available to these couples as domestic partners.

If the Court decides to invalidate the same-sex marriages performed in California in 2008, the most severe effects may be felt by out-of-state same-sex couples who married in California in order to have the marriage recognized under the laws of their own state.  For example, New York currently recognizes same-sex marriages performed in other states since no provision in state law limits the definition of marriage to only opposite-sex couples, even though same-sex marriages may not be performed in New York.  Same-sex couples in New York can obtain the same rights and protections afforded to opposite-sex spouses only by marrying in a state that has legalized same-sex marriage.  Since the passage of Proposition 8, same-sex marriage is now legal only in Connecticut and Massachusetts.  New York does not provide for any other form of statewide same-sex relationship recognition; therefore, domestic partners or partners in a civil union from another state are not entitled to any legal rights or protections under state law.  If the same-sex marriages performed in California in 2008 are invalidated, the couples who married there and now live in a state such as New York may therefore lose certain rights.

Employee Benefits for Domestic Partners

Although Proposition 8 may deny same-sex couples the right to legally marry if it is upheld by the Court, the amendment to the state constitution will have very little impact on the employee benefits available to same-sex couples. Proposition 8 will not change the mandates of the California Insurance Equality Act, which requires insurance plans to offer spousal equivalent benefits to registered domestic partners in California.  Same-sex couples need only register their relationship as a domestic partnership in order to continue to receive protection and coverage under insurance plans in the state. 

Employers are generally free to structure domestic partner benefit policies in any manner they choose.  Aside from the California Insurance Equality Act and various equal benefits ordinances governing contractors with the state or various cities, employers in California are not required by any other legal mandates to provide spousal equivalent benefits to employees' domestic partners.  Rather, employers have the option of extending benefit coverage to domestic partners and can chose what, if any, benefits will be offered.  Employers who do not want to provide coverage for domestic partners very often can do so by amending their benefit plans to clarify that the only "spouses" covered by the plan are opposite-sex spouses.

Employers that have not already formulated and implemented domestic partner benefit policies may face increased pressure to do so if Proposition 8 is upheld and domestic partnerships are once again the only legal classification for same-sex partners in California.  Supporters of same-sex marriage have promised to continue to fight for marriage equality regardless of the outcome of Proposition 8.  Only time will tell how same-sex partnerships in California will develop and what steps employers may need to take to modify their benefit plans accordingly.

Todd Solomon


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.