Employee Benefit Plans Subject to Review Following U.S. Supreme Court Decision
On June 26, 2013, the United States Supreme Court ruled that a key part of the Defense of Marriage Act (DOMA) was unconstitutional. As a result, federal laws must recognize same-sex marriage in states where such marriages are valid. Minnesota will become one of those states on August 1, 2013 when the newly passed law recognizing same-sex marriage becomes effective.
All employers in Minnesota will be affected by these changes in federal and state law regarding employment benefits. In particular, the new law will have an impact on employee benefit plans that are subject to the Employee Retirement Income Security Act (ERISA). We expect that various state and federal agencies will be issuing further guidance on the application of this Supreme Court decision to employee benefit plans and policies. Based on what we know now, here are some key benefit plan provisions that will most likely be affected for Minnesota employers:
- Retirement plan beneficiary designations
Employers will have to provide retirement benefits to same-sex spouses of Minnesota employees on the same terms as provided to opposite-sex spouses. This includes providing a qualified pre-retirement survivor annuity and death benefits. Definitions of “spouse” in retirement plans will now include same-sex spouses.
- Spousal consent rules
Employers with employee benefit plans that require spousal consent (such as pension plans, some executive compensation plans and some stock option plans) may have to revise definitions and forms to accommodate same-sex spousal consent.
- Health plan eligibility
Health plans that offer coverage for spouses should include same-sex spouses of Minnesota employees. Health plan coverage for same-sex spouses will no longer be treated as income to employees, but rather, will be treated as a pre-tax benefit.
- Flexible Medical Spending Account expense eligibility
Flexible medical spending account reimbursement for spousal health expenses will be extended to same-sex spouses in Minnesota.
- Family Medical Leave Act eligibility
FMLA plans will need to be amended to allow an employee to take leave for the serious health condition of a Minnesota same-sex partner. For those employees employed in a state where same-sex marriage is not recognized, the employer may decide to extend FMLA coverage to same-sex spouses or not. In those states where same-sex marriage is not recognized, there may be risk if leave for same-sex spouses is counted toward the 12-weeks allowed under the FMLA.
- COBRA eligibility
COBRA coverage is now allowed for Minnesota same-sex spouses.
Employers operating in several states face additional complexities if same-sex marriage is not recognized in each of those states. Wisconsin and North Dakota, for example, do not recognize same-sex marriage and, in fact, have pending constitutional amendments banning same-sex marriage.
The specific impact on each plan depends on the plan’s provisions, the residency of employees covered by the plan and whether the plan permits the participation of domestic partners. Plan sponsors should evaluate their benefit plans to determine what actions are necessary to comply with the Court’s decision for the remainder of 2013 and for 2014 open enrollment. This is a fast developing area and the employment law and employee benefits team at Larkin Hoffman can assist with evaluations and provide advice regarding appropriate actions for your organization.