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Jun 2013
27
June 27, 2013

What Does the DOMA Ruling Mean for Benefit Plans?


Yesterday, the Supreme Court issued its long awaited decision on the constitutionality of a key section of the Defense of Marriage Act (DOMA). In a 5-4 decision, the Supreme Court struck down the part of DOMA that defines marriage as between one man and one woman for purposes of all federal statutes and regulations. The ruling will affect over 1,000 federal laws and regulations in which marital or spouse status is addressed as a matter of federal law, including those affecting employee benefit plans.

What does this mean for employee benefit plans?

In those states that recognize same-sex marriages, same-sex and opposite-sex spouses will now have to be treated the same under the federal laws governing employee benefit plans. For example:
 
  • For health plans, benefits provided to same-sex spouses will no longer be subject to federal income tax and COBRA coverage will have to be offered to same-sex spouses.
  • For retirement plans, same-sex spouses will have to be recognized as the presumptive beneficiary and be entitled to the protections of the qualified pre-retirement annuity (QPSA) and qualified joint and survivor annuity (QJSA), if applicable.
In those states that do not recognize same-sex marriages, additional guidance on how federal law will coordinate with state marriage laws is needed. The Supreme Court’s ruling did not change the provision of DOMA that allows states to refuse to recognize same-sex marriages performed in other states. This means the 37 states, including Michigan, that have laws or constitutional amendments prohibiting same-sex marriage will not have to recognize, for state law purposes, such marriages entered into in states where it is legal.

It is unclear, though, what this ruling means in these states in the employee benefits area. The Supreme Court’s opinion did not address which states' laws control for federal law purposes:  the couple’s state of marriage or state of domicile. Until guidance is issued, employers have arguments to support either approach. The litigation risk, however, is greater if the employer uses the state of domicile rule and the state of marriage rule is ultimately determined to control. For example, same-sex spouses could claim they were improperly denied rights to medical coverage or survivor benefits in retirement plans. The risk in following the state of marriage rule, if the state of domicile rule is ultimately determined to control, is only that the employer would have reported income incorrectly on W-2s for health coverage or participants would have been wrongly required to get spousal consent to retirement distributions.

Warner Norcross & Judd’s Employee Benefits/Executive Compensation Practice Group will continue to analyze the ruling and monitor guidance. 

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