Client says 401(k) plan has to contain domestic partner benefit provis

[Earl]

A client calls me up and says that the 401(k) plan has to contain domestic partner benefit provisions to qualify for a city contract. What can he be talking about?

Only employees can defer....

Spouses have beneficiary rights....

Can the plan require that a person name his/her domestic partner as primary beneficiary?

any other ways that DP can be referenced?

Thanks

[Guest ptpnthr]

I'm not sure what the City's rule is, but this raises an interesting question for whatever domestic partner rule the City has may be preempted. I haven't looked at the issue, but maybe someone else can say whether offering benefits to a domestic partner is a violation of the exclusive benefit rule. Even if it is not, I'm sure the City's ordinance regulating a 401(k) plan will be preempted. Of course, going to the City and yelling about some (to them) obscure federal law is not going to help you to get your contract. Then again, if you do what they say you may be in violation of the exclusive benefit rule in ERISA and the Code. Talk about your Catch-22. If it is worth an awful lot of money to you, I recommend you seek counsel.

[pjkoehler]

The City Ordinance requires as a term of contracting with the City that every person or entity that enters into or amends a contract or lease with the City not discriminate during the term of the lease or contract in the provision of benefits "between employees with domestic partners and employees with spouses . . . where the domestic partnership has been registered with a governmental entity." See S.F. Admin. Code § 12B.1(B) and § 12B.2(B). The Ordinance aims to require that parties doing business with the City not discriminate based on sexual orientation or marital status. The Ordinance applies to any employee benefits but includes a non-exclusive illustrative [*6] list that includes bereavement leave, family medical leave, health benefits, membership and membership discounts, moving expenses, pension and retirement benefits or travel benefits. Id. at §§ 12B.1(B), § 12B.2(B). As enacted, the Ordinance's nondiscrimination policies apply to: (i) any of the contractor's operations within San Francisco, (ii) a contractor's operations on real property outside of San Francisco owned by the City or which the City has a right to occupy, (iii) a contractor's work in other places outside the City within the United States where work related to a City contract is being performed, and (iv) any of a contractor's operations elsewhere in the United States. Id. at §§ 12B.1(d)(i)-(iv). In Air Transport Association of America v. City and County of San Francisco (ATA), 992 F. Supp. 1149 (N.D. Cal. 1998), the court found that § 12B.1(d)(iv) of the Ordinance is impermissibly extraterritorial under the dormant Commerce Clause, and for the additional reason that the Ordinance offends the Due Process Clause of the Fourteenth Amendment. See also Air Transportation Assoc. of America v. City and County of San Francisco, 1999 U.S. Dist. LEXIS 8747.

[Earl]

thanks - all the health and leave issues make sense, but what can a pension plan do?

Can it require participants to name a DP as primary beneficiary? Can it place a DP in the primary position and require his/her consent to be replaced?

(as my client said "have to be eligible to go on the plan.." I thought that was pretty funny, actually.)

[Guest Cindyd]

Check out the Pension Plan Fact Sheet at http://www.ci.sf.ca.us./sfhumanrights/compreso.htm. It gives a couple of examples of domestic partner provisions in pension plans.

[Guest ptpnthr]

I'm no expert on the ordinance, but it sounds like as long as long as you don't prevent an employee from naming a DP as a beneficiary, then you will be OK. There is nothing wrong (under the exclusive benefit rule or otherwise) with an employee naming a DP as a beneficiary, as long as you meet the QJSA and QPSA rules. But again, I'm no expert on the City ordinance. I still think it is preempted. If I were you I would call the City and ask them what they need. They will probably tell you if you must "force" the participant to select the DP as a beneficiary, or if you need only to allow them to do so. The trickier question is whether a DP must have the rights of a spouse under the QJSA and QPSA rules. Again, I would think the law is preempted, but I would ask the City what their looking for.