In a 5-4 decision, the U.S. Supreme Court has ruled that a key portion of the federal Defense of Marriage Act (DOMA) is unconstitutional. The case, United States vs. Windsor, strikes down Section 3 of DOMA. That section had defined marriage – for purposes of federal law – as a bond between one man and one woman. Accordingly, where the terms “marriage” or “spouse” are used in the Tax Code, in COBRA, HIPAA, or ERISA (or any other federal law), the terms have not included same-sex spouses, even if validly married under state law.
Because of the Court’s decision, same-sex couples validly married under state law will now be considered married under federal law. The Court did not upend other aspects of DOMA, including a provision allowing states to decide whether to recognize same-sex marriages validly formed in other states. And in a related decision, the Court declined to say whether there is a constitutional right to same-sex marriage. Effectively, this means each state will continue to decide whether to recognize same-sex marriages, for purposes of state law.
Nevertheless, the Court’s decision may have significant impact on employer-sponsored benefit plans, and how they are administered. For example, health coverage supplied to a same-sex spouse should be nontaxable under federal tax rules (and an employee’s share of premiums for same-sex spouse coverage should be payable pre-tax through a cafeteria plan) without regard to the same-sex spouse’s “dependency” on the employee. But are employees who paid taxes on health coverage for a same-sex spouse entitled to a refund? If so, for what period? Are health plans that cover only opposite-sex spouses now required to offer coverage to an employee’s same-sex spouse? Federal agencies, including the IRS, will need to weigh in on the many potential impacts of the ruling.
We are preparing an Alert addressing these and other related issues, and will distribute that to you shortly. In addition, we have scheduled a webcast for July 10 to address the practical implications of the Court’s ruling. Please click to register<http://r20.rs6.net/tn.jsp?e=001dQiuipSEPCsHKEY10RqQvvEYEG6Q5dcGakWuhoXvkNYacidOP5Nj6SyAcfghJS0Cl5NpiH8-uE5oNteK_invIGX89D-7i92pZbUlFw_WJaRSnzFLC_UF5GupgCQZ7-FVQi-MxlDRdxRMq7f4e4SlQ2DIgrtV3IGkHol43yRUiz3Gd36YjY9UqMVQoQ-0-zOU> for the complimentary webcast.
Mark Holloway, J.D.
Lockton Companies, LLC