Same-Sex Marriages and Group Health Benefits

On October 6, 2014, the Supreme Court of the United States declined to review seven cases in which the lower appeals court had ruled that a state law or constitutional provision that prohibited same-sex marriage was unconstitutional. This declination means that the ruling of the appeals court is law, and that same-sex marriages are (or soon will be) legal in all of the states governed by these appeals courts. One of the justices on the Supreme Court noted that since all of the appeals courts have so far found state bans on same-sex marriage to be illegal, there is no conflict — yet — that requires a decision by the Supreme Court to resolve.

The decision of the Supreme Court, coupled with a decision by the Court of Appeals for the Ninth Circuit on October 7, 2014, invalidating same-sex marriage bans in several more states, means that approximately two-thirds of the states now recognize same-sex marriage (whether performed within the state or in another state or country that recognizes same-sex marriage). See the end of this article for a current listing of the status of the states. This area continues to change rapidly and state and local laws and ordinances also may apply — employers are encouraged to consult with local counsel before taking any action. This article provides general information, and does not address, for example, state taxation of premiums or the effect of these decisions on qualified plans.

In June 2013 the Supreme Court ruled that the Defense of Marriage Act (DOMA), which provided that, for federal law purposes, marriage could only be between a man and a woman, was unconstitutional. The Supreme Court decision did not address state prohibitions on same-sex marriages, which many courts are now considering and most have found to also be unconstitutional.

As a result of these rulings, employers need to review the eligibility requirements in their group life and health plans, Section 125 plans, and health reimbursement arrangements. The Employee Retirement Income and Security Act (ERISA) requires employers to administer their plans according to the terms of the plan, which means that the plan’s definition of a covered spouse is key. A plan that covers “spouses” or “lawful spouses” must offer coverage to same-sex spouses if the employer is located in a state thatrecognizes same-sex marriages (whether the marriage was performed within the state or in another state or country that recognizes same-sex marriage).

Opinions differ as to whether an employer in a state that recognizes same-sex marriage may continue to write its self-funded plans to exclude same-sex spouses. To date there is only one court case that addresses this issue – in that case, the court held that a self-funded plan that specifically limited eligibility to opposite-sex spouses was not required to provide coverage to a same-sex spouse because ERISA does not prohibit discrimination based on sexual orientation. Roe v. Empire Blue Cross Blue Shield, No. 12-cv-04788 (NSR), 58 EBC 1077, 2014 WL 1760343 (S.D. N.Y. May 1, 2014). An employer that wishes to limit coverage under its Section 125, health reimbursement arrangement (HRA), or group health plan to opposite-sex spouses should:

• Verify that the plan and summary plan description are written to clearly limit eligibility to opposite sex spouses
• Check their state and local laws to be sure that there is not a state or local law that prohibits discrimination based on sexual orientation
• Recognize there is a risk that this decision will be challenged by the Equal Employment Opportunity Commission or an employee

Most practitioners expect that fully insured plans issued in states that recognize same-sex marriages will be required to cover same-sex spouses — employers should contact their carrier to verify this approach and the timing of any change.

The Department of Labor, the Department of Health and Human Services, and the Internal Revenue Service have issued several notices that explain how same-sex spouses must be treated for purposes of Section 125 plans, including flexible spending accounts (FSAs) and health savings accounts (HSAs). Specifically,

• A new same-sex marriage is a change in status event that allows a mid-year change to pre-tax and health and dependent care flexible spending account elections consistent with the marriage.
• Expenses of the new spouse or dependent child may be reimbursed from the FSA or HSA from the date of the marriage.
• As of the date of the marriage, imputed income for covering the new same-sex spouse (who may have been covered previously as a domestic partner) ends.

Although not specifically covered by these notices, employers may wish to consider providing a 30- or 60-day special enrollment period for existing marriages that must now be recognized due to a court decision or change in state law. Employers considering this approach may wish to discuss this with their insurer or stop loss carrier before taking action.

The regulatory agencies only recognize actual marriages of same-sex spouses. This means, for example, that if an employer chooses to offer coverage to those in a civil union or domestic partnership, it still must impute income on the value of the partner’s benefit.

Employers should be aware that FMLA currently is handled differently than other federal laws. The Department of Labor’s Wage and Hour Division has a long-standing fact sheet that states that, for FMLA purposes, the law of the state in which the employee lives when FMLA is requested applies. This means that an employee who is legally married to a same-sex spouse but who moves to a state that does not recognize same-sex marriages is not entitled to FMLA to care for the same-sex spouse. (FMLA generally would be available in connection with caring for the same-sex spouse’s children – in all states – because FMLA is available to anyone helping to raise a child.)

The Department of Labor has issued a proposed regulation that would change the standard for being considered married to the state of celebration rule (as is used for most other things by the federal government) but until that proposal is final, the state of residence when FMLA begins controls.

Employers with employees in multiple states that are concerned about treating employees differently have the option to provide similar, non-FMLA leave to employees located in states that do not recognize same-sex marriages. It may be wise to consult with insurance and stop-loss carriers before implementing this type of a policy.

Employers in states that do not recognize same-sex marriage do not need to take immediate action but should monitor developments.

The IRS has issued Frequently Asked Questions that employers and employees may find helpful. The questions and answers that relate to benefits begin with Q and A10.

The chart below shows which states allow and recognize same-sex marriages, and which do not, as of October 16, 2014. Every state that currently prohibits same-sex marriage has at least one lawsuit pending that challenges its prohibition on same-sex marriages, so the situation in a particular state may change quickly.