The regulation of marriage was historically presumed to be the exclusive domain of the states. Since 1996, however, the Defense of Marriage Act of 1996 (“DOMA”)1 changed this presumption in two important respects:
- DOMA section 2 permitted states to refuse to recognize
same-gendermarriages performed under the laws of other states; and
- DOMA section 3 barred
same-gendermarried couples from being recognized as “spouses” for all purposes of Federal law.
In a much anticipated decision, United States v. Windsor,2 the U.S. Supreme Court recently ruled that DOMA’s definition of “spouse” (DOMA section 3) is unconstitutional “as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment.”
There are over 1,300 federal statutes that either confer separate or unique benefits, or impose separate or unique obligations, on married individuals. These statutes include the Internal Revenue Code (the “Code”), the Employee Retirement Income Security Act (ERISA), and the Family and Medical Leave Act (FMLA). As a consequence, the Supreme Court’s ruling in Windsor has far reaching and important consequences that include the rights and duties of
The Supreme Court did not disturb the provisions of DOMA that allow states to refuse to recognize
Following the Supreme Court’s decision,
The Supreme Court’s decision has left us with many questions, some of which can be answered by the regulators, others of which will be sorted out, if at all, by the courts. Set out below are some of the most pressing questions for employee benefit plans:
(1) Does the decision apply retroactively — that is, can affected employees file for a refund of taxes paid on their imputed income?
The Treasury Department and IRS will need to provide guidance on this issue. Code section 7805(b)(8) confers on the Secretary of the Treasury broad powers to apply the decision prospectively only. If refunds are permitted, they will apply only to “open” tax years, i.e., years for which the tax statute of limitations (generally three years) has not expired. What the Secretary decides will also affect whether employers can make adjustments to the quarterly payroll tax remittances for periods before June 26 (the date on which Windsor was decided).
(2) Must an employee benefit plan cover
The Court did not say. In the case of fully-insured welfare benefit plans, state insurance law will control. In most if not all instances, this will require that
(3) What happens if a validly married
This is another question about which the Windsor decision is silent. Recall that DOMA section 2 survived. That section reads:
No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship. (Emphasis added).
Thus, while a state cannot be required to recognize
Most likely, yes. Under Code section 9801(f)(2)(A)(iii), a special enrollment right arises when “a person becomes such a dependent of the individual through marriage, …” The special enrollment right election period must be at least 30 days, and coverage may be applied retroactively only if elected by the participant within the first 30 days of the special enrollment period.
(5) If a
Again, the answer is most likely, yes. The applicable treasury regulation (Treas. Reg. section 1.125-4(c)(2)(i)) permits a mid-year election change in the case of an event that “change[s] an employee’s legal marital status, …”.
(6) What is the impact on employers with operations in multiple states? Can they apply a single standard? Or must they separately apply each state’s rules?
As explained in question 3 above, DOMA section 2 is directed at states and state law, not Federal law. Presumably, an employer could choose to apply a single standard — e.g., an individual is married for plan purposes if his or her marriage was valid in the state in which it was performed.
(7) Are same-gender spouses entitled to all the survivorship rights accorded traditional married couples under a tax qualified retirement plan?
After Windsor, there is no longer a uniform definition of “married,” “marriage,” or “spouse” for purposes of Federal law, which includes ERISA and the Internal Revenue Code. For the sake of ease of administration, employers would be well served if the Treasury Department and IRS adopted a rule under which a marriage is deemed valid for pension plan purposes if the marriage was valid under the laws of the state in which it took place.
(8) Are elections to designate a beneficiary other than the
Unlikely, particularly if the regulators treat
(9) A lump-sum distribution from a pension plan (without any waiver of spousal rights) was previously provided to an employee who was (and remains) validly married to her
We don’t know. Since the claim would arise under ERISA and not the Internal Revenue Code, there is no regulatory mechanism by which the holding in Windsor might be applied only prospectively. This is a matter that will have to be determined by the courts.
So what’s an employer to do? The obvious first — and critically important — step is to review plan documents to determine how the terms “spouse” and/or “married” are defined. Changes may be required to bring plans into compliance with the new rules and/or to make changes to plan design to conform to the plan sponsor's wishes. And employers in states that recognize
Hopefully, we will begin shortly to get guidance that provides answers to the questions set out above and others.
1 Pub.L. 104–199, 110 Stat. 2419 (Sept. 21, 1996).
2 __ U.S. __ (2013).