By Jason Mettley
On June 26, 2013, the Supreme Court ruled that Section 3 of the 1996 Defense of Marriage Act (DOMA), which defined marriage as a legal union between one man and one woman, was unconstitutional.
The case that prompted the ruling, United States v. Windsor, questioned whether legally married same-sex couples are entitled to the same federal tax benefits as opposite sex couples. The case opened the door for lawfully married same-sex couples to take advantage of more than 1,100 federal benefits already afforded to heterosexual married couples.
For many employers, the ruling created uncertainty with respect to employee benefit administration. Section 2 of DOMA, which allows a state to refuse to recognize same-sex marriages performed under the laws of other states, was not addressed by the Supreme Court and still stands as law. Accordingly, employers in states like Pennsylvania, which does not recognize same sex marriages, were left wondering how to administer benefits to employees in a same sex marriage lawfully formed in another state.
Fortunately, a number of federal government agencies have recently released new guidance about how the change to DOMA will affect employee benefits.
In September, the Internal Revenue Service (IRS) issued Revenue Rule 2013-17 that addressed the interpretation of the terms “spouse”, “husband”, “wife” and “marriage” in the wake of the Windsor ruling. Using a “state of celebration” approach, the IRS has indicated that, for federal tax purposes, a same-sex couple married in a state that recognizes same-sex marriage are legally married, regardless of where they reside.
The Employee Benefits Security Administration (EBSA) of the United States Department of Labor similarly issued Technical Release 2013-04 later in September addressing the topic. The Technical Release advises employee benefit plan sponsors, fiduciaries and participants that the terms “spouse” and “marriage” as used in the Employee Retirement Income Security Act (ERISA) shall apply to all legally married couples, including same-sex couples, no matter the current state of residence.
Notably, the guidance specifies that civil unions or domestic partnerships do not constitute a marriage.
The “state of celebration” interpretation, however, is not uniform. In August, the United States Department of Labor stated that for purposes of the Family and Medical Leave Act (FMLA), a “spouse” is defined based on the laws in the state where the employee resides, even if the couple was legally married in another state.
Employers should make sure all of their documents and practices are consistent with the latest guidance from government agencies. Administrators of pension and retirement plans, including 401(k) plans, should pay particular attention when administering any distributions to a participant in a same-sex marriage as various forms of distribution require spousal consent. Approving certain forms of distribution to a married participant without the consent of the spouse could jeopardize the plan’s tax qualified status and result in the plan or the employer being liable to the spouse.
The Supreme Court’s DOMA decision is without question a landmark decision. As such, it instantly changed the status quo and turned aspects of employee benefit plan administration from certain to uncertain. Even with the additional guidance from government agencies, many details about employee benefits administration are still unclear. Employers should continue to monitor new legal guidance as it is issued and consult legal counsel in any cases of uncertainty.
Jason Mettley is an attorney at Meyer, Unkovic & Scott who focuses on legal compliance of employee benefit plans on legal compliance. He can be reached at firstname.lastname@example.org.