In ruling that the Defense of Marriage Act (DOMA) was unconstitutional, the U.S. Supreme Court also created challenges for HR personnel in managing benefits related to employees in same-sex marriages.
“It’s great that the decision ensures equality and there will no longer be a disparate impact on employees’ spouses,” says Stephanie Martinez, PHR, Director of HR Services at Benefitdecisions, Inc. “But it does present additional challenges for HR.”
Smart Business spoke with Martinez about the ruling and its implications in administering employee benefits.
What was the Supreme Court ruling?
It struck down the DOMA definition of marriage as being between a man and a woman. Couples in same-sex marriages now have equal protection under federal law. The case also dealt with estate taxes.
Which states recognize same-sex marriages, and does the ruling affect other states?
Same-sex marriages are recognized in 13 states: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington, as well as the District of Columbia.
While the ruling has little direct impact in states that do not recognize same-sex marriages, it does affect federal taxes, regardless of residence. The Treasury Department and IRS issued guidance that a ‘state of celebration’ approach will be used regarding treatment of same-sex couples for federal tax purposes, meaning the marriage will have federal tax recognition regardless of where a couple resides.
How are benefit plans changing?
The ruling is impacting benefits that are extended to spouses, ensuring same-sex couples are treated equally as compared to opposite-sex couples. If you don’t offer spousal benefits, there’s no requirement to do so as a result of the ruling.
You also don’t need to extend benefits to same-sex spouses if you have a self-insured wellness plan or are in a state that doesn’t recognize same-sex marriages. However, if you’re not extending that benefit to same-sex couples you could face legal challenges because it could be viewed as discriminatory.
If you offer a qualified retirement plan, it must treat the same-sex spouse as a spouse for purposes of satisfying federal tax laws. The plan must recognize valid same-sex marriages, even if the state they live in doesn’t recognize same-sex marriages.
Another change is that employees’ health plan contributions for same-sex spouses and children can now be done on a pre-tax basis. Also, they are eligible for COBRA continuation coverage.
In states that recognize same-sex marriage, the Family and Medical Leave Act (FMLA) extends to same-sex couples, giving them the right to take leave to care for their spouse.
Some questions that remain unanswered for HR representatives include whether same-sex spouses will be able to claim their benefits retroactively to the ruling’s effective date. There’s also a question as to whether past federal tax returns can be amended to claim refunds, and if same-sex couples will get their FICA taxes refunded.
What should employers be doing now in response to the DOMA ruling?
Private sector organizations in those 13 specific states should look at how benefit plans are communicated to employees. Make sure payroll taxes are handled correctly, that you’re collaborating with your health care insurance provider regarding COBRA coverage and that communications are modified to reflect necessary changes.
Pertinent policies for things like FMLA and COBRA will need to be updated in your employee handbook.
As an HR representative, it can be difficult from a legal standpoint to stay on top of all of the changes, and how those changes may impact your organization. One complication is that state definitions of terms like domestic partnerships are not clearly defined across the board. Civil unions and domestic partnerships are not normally affected by the DOMA ruling, but California law expanded the scope of domestic partnerships to include all the rights and responsibilities of a legal marriage.
Any effort to move forward with providing equal opportunity for all individuals is a step in the right direction. However, there are many things you need to pay attention to in order ensure everything is done lawfully. ●
Insights Employee Benefits is brought to you by Benefitdecisions, Inc.