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July 15, 2013

Employee Benefit Implications of The Supreme Courtís Doma Decision

On June 26, 2013, the United States Supreme Court held that the Defense of Marriage Act’s (“DOMA”) definition of marriage as being limited to a union between a man and woman was unconstitutional.  U.S. v. Windsor, No. 12-307.

Effect of Ruling on Employee Benefits
Under DOMA, employee benefits affected by federal tax law often caused same sex married couples to be treated differently than other married couples.  The Windsor decision may impact employee benefits and plans as follows:

  • Employer Provided Health Insurance -  Under DOMA, for employees in a same sex marriage, the cost of the spousal coverage previously had to be imputed to the employee for federal withholding purposes. The imputation of such income is no longer required.
  • Self-insured Health Plans – Self-insured group health plans that used the DOMA definition of marriage will need to be amended to comply with the Windsor decision.
  • Cafeteria Plans - An employee with a same sex spouse can now contribute to cafeteria plans, health savings accounts and dependent care assistance programs on the same basis as employees with opposite sex spouses.
  • Qualified Domestic Relations Orders (QDRO) - A same sex spouse may now be named as the “alternate payee” of an employee’s retirement plan benefits.
  • COBRA notifications - Continuation of health insurance notices must now be given to same sex spouses of employees.
  • Family and Medical Leave Act – Employers should treat same sex spouses like opposite sex spouses for FMLA purposes.

What Employers Should Do Now
Employers should review all benefit plans to consider the impact of Windsor, including Windsor’s potential effects on the definition of “spouse” and “child” for benefit and beneficiary designation purposes. 

An important issue left uncertain by the Windsor decision is the impact on legally married same sex couples who live in states that refuse to recognize same sex marriages.  The part of DOMA that excused states from recognizing same sex marriages performed in another state was not an issue before the Court in Windsor and the Court did not rule on this issue.

We anticipate further legal challenges as well as IRS guidance on Windsor’s impact on employee benefits.  We will keep you apprised of material developments.

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If you have any questions regarding the Windsor decision and its effect on employee benefits plans or policies, please do not hesitate to contact us.