Benefit programs are still struggling with issues related to same-sex-spouses in light of the Supreme Courts invalidation of part of DOMA which prevented federal recognition of same-sex-marriages. The Windsor case now makes the law of the state as a controlling point for state law determinations. However, the law of the state may be in terms of (1) where the marriage took place, or (2) where the marriage resides.
Some interesting considerations for benefit plans, TPAs, insurance carriers, employers to consider:
STATE MARRIAGES: California, Connecticut, Delaware, Minnesota, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, Vermont, Washington and Washington, DC were among the first states to legalize same-sex marriages. For an updated list, please see procon.org
RULE BY RULE: It seems that each rule may need independent analysis. While for federal tax purposes, the state law where the marriage took place is key, for FMLA (or other purposes) the law may be where the marriage resides. See DOL fact sheet on FMLA at
OTHER COUNTRIES: Several other countries recognize same sex marriages, it appears that state law for this purpose includes any jurisdiction that has legal authority to sanction a marriage.
PUERTO RICO: Puerto Rico has a DOMA like rule of their own and they are not directly subject to U.S. tax rules. Special care must be given to Puerto Rico benefit programs. In some cases, the determination of these rules may be based on whether or not your Puerto Rico plan is only for Puerto Rico or if it is "Dual Qualified" for U.S. and Puerto Rico law.
STATE CIVIL UNIONS OR STATE DOMESTIC PARTNERSHIPS: Many states have registered civil unions or domestic partner rules which provide additional rights to individuals who meet these requirements. It appears that if they are not married under state law, there is no direct change for these relationships.
EMPLOYER DOMESTIC PARTNERSHIPS: Many employers have their own definition of domestic partner relationships. These can be different than the state recognized relationships above. It appears that if they are not married under state law, there is no direct change for these relationships.
ACCOUNTS: Accounts may need their own seperate programming on these rules, especially if your account contributions or distributions are subject to state law. Some states may not allow pre-tax distributions from an FSA or HSA for a SSM. Because these accounts may not have the same enrollment as major medical, they may need a different solution for tracking enrollment, usage and payroll.
PLAN DESIGN: Certain "rights" under federal law will apply to marriage for benefit purposes. For example, a right to survivor benefit under an ERISA pension plan. These rights should apply to same-sex-marriages but it remains to be seen if employers may define marriage differently in other contexts (e.g. self-insured medical eligibility).
ANTI-DISCRIMINATION FOR LIMITING MARRIAGE: Special care should be taken if a program wants to limit marriages. For insurance, many of the states listed above may require this definition for state filings. Also, discrimination rules like Title VII may come into play. Many states or local jurisdictions even have their own form of Title VII discrimination and some of these even include sexual orientation as a protected category.
COMMUNICATIONS: Special care must be taken to make sure all benefit plan communications including call centers, SPDs, and plan documents align correctly. ERISA fiduciary duty rules are seeing more liability on incorrect or misleading provisions in ERISA benefit programs. Don't forget stop loss provisions when changing plan terms if applicable.
ELIGIBILITY CHANGES: Special care should be taken for broadening eligibility especially for plans subject to HIPAA portability. As we saw with adult child rules, adding someone to medical plan eligibility is a "special enrollment right" subject to notice requirements and the ability to START coverage or CHANGE coverage entirely when this occurs.
RETROACTIVITY: The recent IRS guidance (Notice 2013-17) is effective September 16th, 2013 but more guidance is expected on the retroactive application of these rules including retroactive refunds for employer and employee taxes. See also IRS Notice 2013-61.
COMMON LAW: When figuring out all your steps, don't forget common law marriages in addition to registered domestic partnerships or civil unions. Several states have their "own" requirements on what is a common law marriage and they can differ from one state to the next. Federal guidance already exists with respect to these relationships.
VENDORS, PAYROLL & TPAs: As with any significant design issue, it will be important to make sure all vendors, TPAs, carriers, payroll operators, HR trainings, call centers, plan communications, open-enrollment materials all agree on what the benefit rule(s) are. Lastly, a point throughout this post, this will be an evolving standard and any approach an enity takes must be fluid and ready for change.
If you need help understanding these rules, please contact Kinney & Larson.