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Spousal Benefits: Recognizing Same-Sex Spouses for Benefits Programs

As more jurisdictions recognize marriage equality, employers across the country must reassess their employee benefits with respect to same-sex spouses. As of June 2011, six states and the District of Columbia provide marriage licenses to same-sex couples, compared to just one state in 2004. An additional two states recognize same-sex marriages from other states.

As a result of these changes, employers should be mindful of their existing plan documents and the way in which they define terms such as spouse and domestic partner.

For years, employers could provide spousal-equivalent benefits to same-sex partners through a domestic partner benefits program — this typically involves employers having to make only one plan amendment that adds partners as eligible dependents for benefits. In light of the changes to state law definitions of spouse, and the likelihood that such changes will continue to occur in the future, employers can and should review their existing benefit plan documents to ensure that benefits are fully available to same-sex spouses and partners. This includes both fully-insured, state-regulated plans as well as self-insured, federally-regulated plans.

State vs. Federal Laws and Taxation of Employer Contributions towards Coverage

Largely as a result of the federal Defense of Marriage Act of 1996 (DOMA), state law definitions of spouse and marriage may not always be given effect in connection with employee benefit documentation. Nonetheless, federal laws, incuding the Employment Retiree Income Security Act (ERISA), do not prohibit any employer from affirmatively drafting plan documents to recognize same-sex spouses for most benefits.

In addition to providing coverage to same-sex spouses, employers should be mindful to the state and federal tax treatment that can relate to such coverage. Not all same-sex spouses and partners are subject to the federal income tax for the imputed, estimated value of the employer's contribution towards health benefits (see resources on tax status below) — ensure that your payroll and benefits systems are equipped to track eligibility for tax-free benefits. In addition, state income tax on the imputed value of the health benefits is often not required in those states that recognize marriage equality.

Eligibility Requirements

Not only will more states recognize marriage equality, but employees will move from one state to another. Avoid requiring employees with a legal marriage certificate to satisfy additional requirements such as those required by a domestic partner affidavit — these affidavits were created to help employers track eligibility given the lack of legal structures recognizing same-sex relationships.

Employers with fully-insured, state-regulated plans based in states that recognize marriage equality will generally be required to provide benefits to same-sex spouses if they already provide benefits to different-sex spouses. Employers with plans spanning multiple states, particlarly large self-insured, ERISA-regulated plans, may not be required to provide benefits to same-sex spouses, but should nonetheless do so.

Definitions of spouses eligible for benefits should include same-sex spouses — some examples of plan definitions that will allow same-sex spouses to participate in spousal benefits:

  • Does not expressly reference same-sex spouses, but may include them:
    "Spouse: Your spouse is your legally married spouse as recognized under applicable state law."
    This definition makes clear that the plan does not follow a federal definition of spouse (which would be limited by DOMA), but it does not clarify what state laws will apply — those of the employee's state of residence, state of employment or state of marriage certificate — but the definition would generally include most same-sex spouses for employees working in a state that recognizes marriage equality.
  • Expressly references same-sex spouses with respect to state-recognized marriages only: 
    "Spouse: Your opposite-sex or same-sex spouse as determined under applicable state law at the time and location that the marriage was entered into."
    This definition makes clear the applicable state laws, although it does not recognize marriages entered into in a different country, which could particularly affect employers that work with international employees.
  • Expressly references same-sex spouses, including state or extranational marriages or comparable relationships:
    "Spouse: A spouse of the opposite sex to whom you are legally married under the laws of a state or nation (excluding common-law marriage); or a person of the same sex with whom you have entered into a marriage, civil union, or comparable relationship in a state or nation that sanctions such unions by law and that is valid pursuant to such law at the time that the parties enter into the relationship and such relationship has not been dissolved under the law of the state or nation in which such relationship was initially or is currently recognized."
    This definition makes clear that legal same-sex relationships such as civil unions or domestic partnerships will also be recognized for the purpose of benefits, as well as marriages entered into in a different country.

Note that the definition "Spouse: Your legally married spouse." is not provided as an example here, because it is not clear whether "legally married spouse" is defined under state law or federal law for purposes of the plan. Particularly for health plans or benefits that fall under federal regulation, it is possible for a plan sponsor to invoke DOMA as a basis to not allow a same-sex spouse as a beneficiary, even though DOMA and other federal laws do not generally prevent benefits from being provided to same-sex spouses. However, this definition could be acceptable for employers based entirely within a state that recognizes marriage equality and with a health insurance plan regulated in that state.

Qualifying Events for Plan Enrollment

Recognition of Same-Sex Marriage as a Qualifying Event. As with different-sex spouses, employees who marry a same-sex spouse should be eligible for plan enrollment outside of the open enrollment period. For example, a plan that allows different-sex spouses to enroll within 31 days of marrying an employee should also allow same-sex spouses to enroll within 31 days of marrying an employee.

Recognition of Existing Same-Sex Marriage as a Qualifying Event When Marriage Becomes Available. When a state and its laws otherwise begin to recognize marriages from another state, this generally creates a qualifying event for plan enrollment for employees that have already married in another state — if the plan is state-regulated. Although plan sponsors of self-insured plans may not be required to recognize this as a qualifying event with respect to their plan, they should consider providing similar enrollment rights.

Taxation of Employee Contributions to Coverage. Because of the Defense of Marriage Act, an employee's marriage to a same-sex spouse or partner is not considered a qualifying event for the purposes of changing the amount of the employee's wages used on a pre-tax basis to pay for coverage attributable to the same-sex spouse or partner.

Enrollment Communications & Procedures

Employers should ensure that their communications and forms make clear that same-sex spouses are eligible for spousal benefits by using inclusive language when referring to spouses and by using generic the "spouse" as opposed to "husband" or "wife" language on enrollment forms. For example, a broad and comprehensive list of eligible dependents in Summary Plan Documentation might look like this:

"Dependent —
1. a Participant's legally married spouse as recognized under applicable state law who is:
a. not covered for Benefits as a Participant; and
b. not legally separated from the Participant;
or,
2. a Participant's Domestic Partner who is not covered for Benefits as a Participant; 
or,
3. a Participant's, spouse's, or Domestic Partner's unmarried child or child ...
"

Documentation

Employers should require the same documentation for same-sex spouses as for different-sex spouses. For example, same-sex spouses should not be required to provide a marriage certificate if different-sex spouses are not required to do so, either for enrollment or audit purposes. Equal documentation requirements for enrollment is specifically required by law in some states that recognize marriage equality and some states that recognize Registered Domestic Partners or civil unions.

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