Complex Impact of DOMA Decision on Employee Benefit Plans

In mid-June, I wrote about the potential impact of the Supreme Court’s same sex marriage opinion on employers. Well, now we know what that impact is – or rather, now we know what we still don’t know.

The Perry v. Hollingsworth decision from California is likely to only impact employers in California. But the U.S. v. Windsor decision holding that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional will impact employers across the nation. Unfortunately, the Windsor decision raised as many questions for employers as it answered.

Because the Court only overturned Section 3 of DOMA, the rest of DOMA remains in place. Most importantly, the Court did not mandate that same-sex marriages be recognized, nor did it overturn Section 2 of DOMA. Section 2 provides that the states are not required to give effect to same-sex marriages entered into in other states. Therefore, the federal laws related to marriage must still accept each state’s definition of marriage.

What does this mean for employers? We are only now beginning to figure this out. We will need to wait for guidance from the myriad federal agencies that regulate and enforce the federal laws related to marriage. In essence, however, it means that employers will have to adapt to a variety of definitions of marriage in different states.

Here are a few of the many recent articles on the impact of the Windsor decision on employers: from the Littler law firm, from SHRM, and from two benefits consultants (Towers Watson and Aon Hewitt).

Major issues after Windsor include:

  • Which state’s law should an employer consider – the state where the employee resides, the state where the employee was married, or the state where the employee works? The answer may vary depending on what federal right or benefit is involved. Moreover, keep in mind that Windsor said nothing about civil unions, domestic partnerships, or anything other than that where same-sex marriages are recognized by state law, they must be recognized for federal purposes.
  • Can multi-state employers standardize on a single practice for their benefit plans (probably using the most liberal definition of marriage and spouse), or will they have to have multiple methods of administering their plans, depending on state law? Most likely, they will a complex maze of plan administration – because for some purposes same-sex partners who have married will be spouses and entitled to certain benefits, and sometimes same-sex partners (whether married or unmarried) will be prohibited from claiming other benefits.
  • What differences will there be under ERISA’s requirements for pension plans and welfare plans? As with most benefit plan issues, the starting points are not only the requirements set forth in statutes and regulations, but also the language of the benefit plan documents. Spouses have more rights under pension plans (for example, for purposes of spousal notice requirements, mandated survivor benefits, and qualified domestic relations orders) than under welfare plans (where definitions in plan documents and insurance contracts may adopt different definitions than required in pension plans).
  • When does Windsor become effective? Is the Windsor decision retroactive? In other words, how soon must employers have systems in place to accurately record same-sex marriages, and must employers un-do and re-do a variety of past benefit plan actions, such as distributions? That’s why employers need prompt guidance from the IRS, DOL, SSA, and other regulatory agencies.

Employers can assume that the Obama Administration will issue guidance that favors quick, and maybe even retroactive, recognition of same-sex marriages. So HR professionals and corporate executives involved with benefit plans need to stay on alert. Read the linked articles in this post for a good start in understanding the specific complications the Windsor decision has raised.

What issues has the Windsor decision raised for your benefit plans?


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Filed under Benefits, Human Resources, Law, Management, Workplace

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