Benefits and Compensation

Q&A on Employee Benefits under DOMA Ruling

With the DOMA ruling so recent in our minds, employers have more unanswered employee benefits questions than ever before. Is it now illegal to tax healthcare benefits for a same-sex spouse? How should multi-state employers react if the final ruling comes down that only same-sex couples who reside in a state that recognizes same-sex marriages will be entitled to federal benefits? Will same-sex spouses who are now eligible for their partner’s health plan be able to immediately enroll?

Kate DeForest and Jason P. Lacey were on hand in a recent BLR webinar to lend their expertise on these questions and many more. Check out what they had to say:

Q. Is it illegal to give pre-tax benefits for same-sex couples in states where the marriages are not recognized? How should a multi-state employer – one that is in states that recognize same-sex marriage and also in states that do not – administer benefit taxes?

A.It’s a difficult question in the sense that there’s not a definitive answer at this point. In the big picture, if the employer operates in a state that is not a same-sex marriage state and if the rule turns out to be that individual employees with same-sex spouses will be treated as married for purposes of federal law only if their marriage is recognized in the state where they reside, strictly speaking those same-sex spouses are still not going to be recognized as spouses for purposes of federal law.

It’s going to be just the same as it was before the Windsor decision: those same-sex spouses don’t qualify for health or cafeteria plan pre-tax benefits. It could very well change from state-to-state. This is one of the more difficult administrative challenges that employers are going to face. I wish there was a better answer, but we need to see what the rule turns out to be.

Q. How does DOMA affect common-law marriages in terms of benefits administration for plans that recognize common-law and domestic partnerships? Would they be administered the same way?

A.That is something we will be waiting [for] more guidance on in the coming months. Much of it will depend upon the state. And it will also depend on which is recognized in the ruling: the state of celebration, the state of residence, the state of the employer? And even with that answer, then it depends on whether that state recognizes common-law marriages as well and whether benefits will be owed in those cases.

Before and after Windsor, there’s really no rule that says that an employer benefit plan is actually required to cover any spouse (same-sex, common-law, or otherwise). In fact, some plans already exclude common-law spouses.

Q. In common-law FMLA, is an employer able to require proof (documentation) of a relationship of the common-law marriage prior to granting the leave?

A.The answer is very fact and circumstance specific. Windsor hasn’t changed anything in that regard other than whose common-law marriage would be considered. In terms of proof, the Windsor decision does not change that.

Q. What are the main items multi-state employers should have on their DOMA checklist?

A.That’s a tough question mostly because we don’t yet know what the rules will be. That said, item number one is to watch for future guidance to see what cases will require same-sex spouses to be recognized as spouses under federal law and in other ways. Once you get beyond that, [it] will either resolve some issues or create new ones. You’ll need to go through on a state-by-state basis to see what rules will now apply.

Q. If the open enrollment deadline has passed to make changes to benefit plans, are employers in any violation by not providing benefits to same-sex couples?

A.It’s going back to the question of whether the Windsor decision has prompted an “event” that would necessitate a special enrollment period. We don’t know this because we don’t know how it will apply to a marriage that wasn’t previously recognized as valid for enrollment purposes.

Q. When do you expect further guidance? Days? Months? Longer?

A.Good question. We’re hopeful that it’s sooner rather than later, but the federal agencies have a lot on their plate, including healthcare reform. There’s some expectation that some preliminary guidance will come later in the year, and hopefully some additional, more-detailed guidance by the end of the year so that changes can be made accordingly.

Q. Where can a payroll professional go for up-to-date information on same-sex marriages in reference to the taxation of health benefits? Can you recommend a website?

A.Unfortunately there are none that we know of that are specific to payroll provisions. That said, the IRS actually maintains a reasonably good website and they should be rolling out some information and guidance in the form of frequently asked questions and other informal guidance. They don’t always publicize when they’re issuing new guidance, however.

There will be complicated questions to resolve, but the government knows this and will do what they can to provide guidance and a path on what is next.

For more information on how employee benefits may be affected by the DOMA ruling, order the webinar recording of “Employee Benefits: How the Supreme Court’s DOMA Ruling Will Impact FMLA Obligations, Healthcare Coverage, and More.” To register for a future webinar, visit http://store.blr.com/events/webinars.

Kate DeForest is an attorney with Sulloway & Hollis, PLLC, in New Hampshire, where her practice focuses on labor and employment, business litigation, and health-care issues. Ms. DeForest has written on the constitutional challenge to DOMA for www.HRlaws.com.

Jason P. Lacey, a partner with Foulston Siefkin LLP, in Kansas practices primarily in the areas of employee benefits, ERISA, and executive compensation. Mr. Lacey has written on the DOMA case for www.HRlaws.com.