COBRA for Common Law Spouse??

[Christine Roberts]

Employee who is getting "divorced" revealed to employer that he had never actually been married but had assumed he had a common law marriage. Employee is in state that does not allow common law marriage but that recognizes common law marriages from other states. Presuming employer offers COBRA to employee and to his three children (who had been covered as dependents), what does the employer offer the "common law" spouse??

[Christine Roberts]

I am going to take a stab at answering my own question . . here goes.

COBRA continuation coverage is limited to "qualified beneficiaries," which is a term that the COBRA regulations define as including (a) the former employee; and; (B) his or her spouse and dependent children (including children born or adopted during the period of COBRA coverage).

A "spouse" for these purposes is a spouse as defined under federal law. Originally, the IRS rule was that the status of someone as a "spouse" under federal tax law was governed by applicable state law. However, in 1996 Congress enacted the "Defense of Marriage Act," which provides that, for purposes of interpreting application of federal laws, the term "marriage" is limited to 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 wife.

Based on this law the IRS has concluded that domestic partners (i.e., same-sex spouses) do not qualify as apouses under federal tax law. Therefore, for a non-spouse partner (whether same sex, or opposite sex but not partner to a "marriage") to receive COBRA benefits, he or she would have to qualify as an employee's dependent as defined in Internal Revenue Code Section 152.

That definition in turn is limited to domestic partners who (a) receive more than half of his or her financial support in a calendar year from the employee; (B) the domestic partner has the employee's home as his or her principal place of residence and is a member of the employee's household; and © the relationship between the employee and the domestic partner is one that is not in violation of local law.

If a common-law spouse fulfills the Section 152 definition of a dependent, he or she can receive COBRA benefits on the basis of that status, and not as a spouse.

Any comments, questions, or criticisms are welcome.

[Kirk Maldonado]

Christine:

Aren't you skipping the question as to whether a "common law" spouse is a legally-married spouse under applicable state law? If the state recognizes "common law" marriages, it would seem that the person would be the spouse, and therefore entitled to COBRA.

By the way, I've been told that California does not recognize "common law" marriages. I have no idea whether any states recognize them.

[Christine Roberts]

Kirk, it was my understanding that the state law definitions of marriage received no deference after the Defense of Marriage Act was enacted in 1996 - however perhaps you are saying that "legal union" for purposes of the Defense of Marriage Act has built into it a state law definition of marriage.

In California, there is no statutory definition of a common law marriage but it is my understanding that Calfornia "recognizes" a common law marriage formed in another state that DOES have such a statutory definition.

[Kirk Maldonado]

Christine:

My understanding what that the act was intended to preclude federal recognition of marriages between persons of the same sex; not to refuse to recognize common law marriages of persons of the opposite sex that are valid under applicable state law.

However, I must confess that I'm no expert on this matter. I'm only giving you my (uneducated) opinion for whatever it's worth.

[Christine Roberts]

Kirk, I think that you are right in that the concept of a "legal union" in the Defense of Marriage Act must, by definition, refer back to a state law standard, as it is a legal transaction goverened by state law.

So a common law spouse could be covered as a spouse under COBRA if he or she meets the state law definition of a spouse. To the best of my recollection (and this has been some time) in California that means that the common law marriage arose in some other state that does define common law marriage under law.

[jeanine]

If the common law spouse doesn't have to get a legal divorce or legal separation/dissolution, then the two are not married no matter that the state recognizes common law marriages of other states. Be careful here--Ohio does not recognize common law marriages that did not exist before 1991 (I think that is the correct year), no new common law marriages can come into effect, but previous ones are still valid. If the couple came from a state that recognized common law and in fact held them selves out as common law married in that state, then by the full force and credit clause the new state would recognize them as legally married. Then they would have to get a real divorce. My understanding is that COBRA only covers legal spouses, however if they can prove they were legally married (under common law in a common law state) then you would offer COBRA. How did the common law spouse get benefits in the first place?

[KIP KRAUS]

I would kind of like to know the answer to Jeanine’s question too. How did the common law spouse get benefits in the first place? And if a common law spouse is not eligible for benefits under the plan then COBRA wouldn’t apply, because he/she should have never been covered any way.

Sounds like the employee may have intentionaly mislead the employer in order to get benefits for the common law spouse.

[Christine Roberts]

As I understand it the employee had a good faith belief that he was in a common law marriage and that his partner in that marriage was a "spouse" for purposes of employment benefits.

[KIP KRAUS]

Christine:

Even if the employee was acting in good faith, does that necessarily give the common law spouse eligibility status under the employer’s plan? If not, then there would be no status as a QB under COBRA.

If the employer had found out that someone ineligible for coverage was in the plan and terminated that person’s coverage would that trigger a QE for COBRA? I would say no, because a non-eligible person having been covered and found out has no status under the employer’s plan and therefore no status as a QB.

Just my thoughts.

[Christine Roberts]

Kip, I would agree that terminating coverage to which an individual was not entitled to begin with, is not a qualifying event for COBRA purposes.

[KIP KRAUS]

Christine:

Not to be argumentative, but isn’t that essentially what we have here, an ineligible person in the plan in error? Not the employer’s error, but the employee’s error by wrog assumption? If so, I would still argue that the common law spouse is not eligible for COBRA.

[Christine Roberts]

Kip - your point is well taken in that, without loss of coverage, there is no triggering event for COBRA. I can imagine a scenario where the "spouse" meets the definition of a dependent for purposes of Code Section 152, and in such a situation it could be argued that the prior coverage was warranted. Loss of such coverage due to job termination for the participant "spouse" could arguably lead to COBRA coverage for the dependent spouse.

[KIP KRAUS]

Christine:

I agree that Section 152 could define someone as a dependent. However, a welfare plan document and/or an insurance contract definition of dependent would take precedence over Section 152 with regard to COBRA eligibility, would it not?

[Mary C]

Our insurance contract and plan allow us to cover domestic partners, but they aren't eligible for COBRA. According to COBRA, its applicable only to legally married spouse and dependent children. We interpret legally married according to the law of the state in which the employee resides - so if the state recognizes common law marriage, we extend COBRA.