Enrolling same-sex spouses

[JDuns]

To the extent that San Francisco, CA and Sandoval County, NM have begun issuing marriage licenses to same sex couples, does anyone have thoughts about the options for a plan that allows employees to enroll their "legal spouse."

(1) Are the couples "legally married"?

(2) Does a plan now need to have a procedure to track the gender of spouses (or whether they are dependents for federal tax purposes) to determine whether the benefits are taxable or non-taxable?

(3) To accomplish (2) does a plan have to ask for information about all employees or just couples with at least one gender-ambiguous name.

Any opinions (other than whether or not such licenses should be granted in the first place) would be appreciated.

[mbozek]

The Federal Defense of Marriage Act provides that no spousal benefits under federal law are available to same sex couples, including any benefit that is available to a spouse under the IRC. The Act provides that the term spouse under any federal law can only refer to a member of the opposite sex which would cover plans subject to ERISA in which state laws would be preempted. This permits plans to limit spousal benefits to a member of the opposite sex although the plan could offer benefits to same sex couples on a volutary basis but the cost of the benefit to the non employee will be taxed to the employee unless dependency is proved under the IRC. The Act also permits a state to deny recognition of a marriage between members of the same sex which has been issued in another state. There is an issue as to whether the marriage licenses issued in SF are valid since the CAl. State constitution prohibits same sex marriages. Note: States (NJ) may give state tax benefits to same sex couples such as being able to file joint state tax returns or provide spousal benefits under state retirement plans.

[Guest eafredel]

I agree that the federal Defense of Marriage Act ("DOMA") provides that for purposes of federal law marriage is defined as between a man and a woman. Thus, for purposes of most plan covered by ERISA, marriage includes both civil law marriage between a man and a woman, as well as common law marriage between a man and a woman (in those states that recognize common law marriage, including the District of Columbia). The result may be different if the plan is subject to state law (as well as ERISA), such as an insured health or life insurance plan.

I do not think that Proposition 22 in California (which says that marriage may exist only between a man and a woman) was an amendment to the California Constitution. I think it was legislation adopted through the initiative and referendum process by the people of California,

In New York, I believe the mayor was only performing ceremonies; no licenses were issued. (Note: I am not licensed to practice in either of these jurisdictions.)

I think these two states will clarify the situation soon, as will Massachusetts. Until that happens, have you considered recognizing domestic partnerships (either same sex and/or opposite sex)? Many other employers have done so. This is not "marriage" but it does address the issue of equal rights for gay and lesbian employees (as well as opposite sex employees who are not married but who have a committed relationship).

[JDuns]

Most domestic partnership coverages I have seen have separate premium structures. For an employer that a traditional plan and domestic partner coverage, a same-sex spouse would appear to be able to be enrolled in either benefit (as a spouse for the "main" plan or as a domestic partner). Enrolling under family coverage in the main plan will often be cheaper than enrolling for employee + domestic partner.

Thus, even plans that have already adopted domestic partner coverage may have to address this (and the necessary systems to deal with the tax implications for the "main" plan of covering beneficiaries who may not be covered on a pre-tax basis).

[Guest b2kates]

I do not agree that state law has an impact on ERISA insured plans. Eligibility in a Plan is governed by ERISA, states may only impose mandated coverage in the insurance contract, but not on the plan itself. Accordingly ERISA would preempt any state requirement to cover same sex spouses.

[JDuns]

Again, unless the plan defines "legal spouse" as a "spouse pursuant to a state recognized marriage between one man and woman", I think that the term "legal spouse" would generally be defined with reference to state law which would allow anyone legally married to enroll their spouse, regardless of the gender of the parties.

[mbozek]

I dont think that state laws permitting same sex marriages would have any impact on an ERISA plan because the Defense of Marriage Act specifically provides that no benefit under federal law is available to a spouse who is the same sex as the employee eg., tax free coverage of dependents under a health care plan or 50%

J & S. Also only state laws relating to regulation of insurance companies are exempt from ERISA and same sex marriage laws are laws of general application. It is questionable whether a state law recognizing same sex marriages in one state (MA) could be enforced against an insurance contract issued in another state which does not recognize same sex marriages.

[rosskeene]

I think perhaps you read too much into the federal Defense of Marriage Act. Here's what it says:

Chapter 1 of title 1, United States Code, is amended by adding at the end the following:

Definition of 'marriage' and 'spouse':

In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word 'marriage' means only a legal union between one man and one woman as husband and wife, and the word 'spouse' refers only to a person of the opposite sex who is a husband or a wife.

An ERISA plan, while subject to numerous federal laws including the IRC, is neither an Act of Congress nor an administrative pronouncement. Furthermore, DOMA does not define marriage or spouse for general purposes, nor does it say who is married and who is not. State law has always governed marriage. Most importantly though, DOMA does not tell us how to interpret the term "spouse" in an employee benefit plan.

If your plan says a spouse is a person who is legally married to the participant, then if the state says same sex marriages are legal you may have a spouse, entitled to everything to which the plan says spouses are entitled.

Of course, there are certain things that federal law reserves for federal-law spouses--tax deductibility and QDROs come to mind. There are certain things to which federal law says unmarried persons are entitled. For example, the QJSA for an unmarried participant is a single life annuity. Nonetheless there are many benefits which federal law does not preclude a plan offering to a same-sex spouse.

I agree that a state mandate regarding coverage for same-sex spouses would likely be preempted. But merely legalizing same-sex marriage is not the same as a coverage mandate.

To avoid problems and disputes, every plan should be amended to provide for exactly what the plan sponsor intends. Many sponsors will choose to extend benefits to same sex spouses to the extent allowed under federal law, just as they have with domestic partner coverage. Many will probably choose to adopt the federal definition of marriage, either for simplicity or based on their beliefs. In the absence of an amendment, there is sure to be conflict between the plan and federal law, but newly married same-sex spouses will probably have a reasonable expectation of equal treatment, at least to the extent allowed under federal law. Note that these same-sex spouses are likely to be somewhat activist in insisting on such equal treatment.

Unless your plan explicitly defines "spouse" to exclude same-sex spouses (which it could certainly do), you are likely to be challenged if you choose not to treat same-sex spouses the same as opposite sex spouses for all purposes save those precluded by federal law.

Saying that an ERISA plan should simply ignore state-recognized same-sex marriage is just burying your head in the sand.

[Steve72]

I agree with rosskeene's post, and would add that complications could arise if your plan states that "spouses" are entitled to COBRA. An insurer (or reinsurer, in a self-funded arrangement) will likely want to exclude same-sex spouses from COBRA eligibility due to DOMA, regardless of the manner in which the plan document is interpreted. This could lead to the employer being bound by the plan document without a valid coverage option.

[mbozek]

There is no basis for applying state laws allowing same sex marriage to spousal rights mandated under plans subject to ERISA. Under DOMA the use of the term spouse under any federal law is limited to a member of the opposite sex, e.g., the requirement under ERISA and the IRC for a surviving spouse's benefits, J & S annuities and tax free rollovers of death benefits. Also the term spouse in a FSA must be limited to a member of the opposite sex since the tax benefit for a spouse in a FSA is defined under the tax law, as well as the continuation of health ins under COBRA which is mandated under ERISA. Section 514(a) of ERISA preempts all state laws which would apply to spousal rights under plans subject to ERISA including a state law defining spouse as a member of the same sex as the employee. This is no different than the preemption of spousal rights under state community property laws by ERISA.

The only place where a state law definiton of spouse may be applicable in an ERISA plan is where spouse is used as an optional term such as a default beneficiary for pension benefits in the event of the employee's death without a designated beneficiary. However the plan could define spouse with reference to the laws of a state that does not recognize same sex marriages, e.g. " to the extent not preempted by ERISA, the laws of the state of Texas will apply". In an insured plan the law of the state where the contract is issued would apply.

The term spouse would include same sex members under plans regulated by state law, such a state pension plans. NJ recently passed such legislation.

[rosskeene]

The point is that we are not just talking about benefits mandated under federal law. Most of the benefits that plans provide to spouses are not "mandated" at all. Just because DOMA limits the federal-law definition of "spouse" to opposite sex spouses certainly does not mean that an ERISA plan cannot define spouse for plan purposes to include same-sex spouses and generally provide spousal benefits to such spouses. The COBRA example is a good one, federal law requires a plan to extend COBRA benefits to opposite sex spouses, but nothing in federal law prevents a plan from extending the same benefits to same-sex spouses. Likewise, a plan that subsidizes the QJSA and QPSA required to be paid to opposite sex spouses under federal law could do the same for the same benefits paid to a same-sex spouse.

If a plan simply says a "spouse" is legally married to the participant, then nothing in federal law says that doesn't include same-sex spouses. Plans must be more specific, because in some cases they are not allowed to extend spousal rights and benefits to same-sex spouses. For instance, a DRO is not a QDRO if the alternate payee is a same-sex former spouse, and the QJSA for a participant married to a same-sex spouse is a single life annuity and not a 50% J&S with the same-sex spouse as the joint annuitant. If, as a result of a blanket non-specific definition, the plan provides for benefits to a same-sex spouse that are not allowed to be provided to a same-sex spouse under federal law, the plan has a problem.

Every plan sponsor should act now to avoid this problem. Option #1 is for each plan to adopt a blanket definition of "spouse" and "marriage" that mirrors DOMA or incorporates it by reference. Option #2 is to carefully evaluate each plan provision that references a spouse or marriage determine whether the DOMA definition or a more liberal definition is appropriate for that provision.

I don't think invoking the laws of a state with a DOMA, such as Texas, necessarily gets you where you want to go. Just because you say, "To the extent not preempted by ERISA, the laws of the state of Texas shall apply to this plan," does not mean that the definition of "spouse" or "marriage" under the Texas DOMA will apply to the plan. A same-sex couple legally married in Massachusetts could still claim spousal benefits. I think you would have to define the terms, and you could do that jsut as easily with reference to the federal DOMA if that is where you want to end up.

Don't think that, just because the insurance bought to fund a plan is issued in a state where same-sex spouses are not recognized, the plan might not be required to pay same-sex spouse benefits. The case books are filled with plan documents that do not mirror the terms of insurance policies. In those cases the plan still pays--just not the insurer.

[mbozek]

Since most plan sponsors cannot make the changes that you recommend because they have adopted m/P or volume submitter programs which do not permit individual amendments, plan sponsors must rely on the preemption of state laws by ERISA to prevent the extension of benefits for married couples to non traditional relationships. (Please explain how an employer who has adopted an m/p plan can make amendments to clarify the definition of spouse that you propose).

1. State laws determining spousal rights to retirement benefits have been preempted by ERISA by the US Supreme Ct. See Boggs v. Boggs, 520 US 833 (community property), Egelhoff v. Egelhoff, 533 US 141, (termination of rights of ex spouse under state law) because ERISA preempts state laws affecting the administration of plans subject to ERISA. I dont know of any exception for a state law that mandates recognition of same sex marriage especially since ERISA does not preempt any other federal law such as DOMA.

2. There are other Supreme Ct cases such as Ingersoll Rand and Delta Airlines that preempt state laws which provide rights not available under ERISA. I would be interested in any cases that apply state laws to plan administration or benefit rights of a plan subject to ERISA.

3. Using a state law selected by the plan sponsor as a reference to intrepret plan provisions not regulated by ERISA is an accepted practice under conflict of laws. A same sex couple married in MA would not be permitted to claim any spousal benefits available under ERISA which are not provided under the plan because (a) MA law is preempted by ERISA and (b) DOMA limits the defintion of spouse under federal law to a member of the opposite sex. Applying a single state law to determine who is married under the plan is permissible under ERISA because it prevents the plan from having to deal with different state laws which would burden plan administrtion which as noted in Egelhoff is the rationale for preempting state laws which affect an employee benefit plan.

My own prototype plan does not define spouse and the employer is the plan administrator who is charged with interpreting the plan. The prototype sponsor is the only party who can amend the plan.

Note: For DC plans which cannot be amended, claims for death benefits by a same sex spouse can be avoided by having the plan administrator file a complaint of interpleader in Fed ct naming the spouse and the relatives of the deceased employees as parties. The PA would pay the funds into the ct and withdraw from the case leaving it up to the ct to decide who is entitled to the benefits.