Supreme Court Strikes Down Defense of Marriage Act (DOMA): Impact on Employee Health & Welfare Benefits

Posted in: Employee Benefits

In a 5-4 decision, the Supreme Court ruled that a key provision of the federal Defense of Marriage Act is unconstitutional.

Defense of Marriage Act (DOMA)
DOMA was enacted in 1996 and prohibited the federal government from recognizing same-sex marriages. It defined marriage as a legal union between one man and one woman as a husband and wife and defined spouse as a person of the opposite sex who is husband or wife. Therefore, the term “spouse” as used in any federal law or regulation referred only to a legally married person of the opposite sex.

DOMA also affirmed the power of each state to make its own decision whether to recognize a same-sex marriage entered into in another jurisdiction. At the time DOMA was passed, no states permitted or recognized same-sex marriages.

The Ruling
In its decision, the Court concluded that DOMA violates the guarantee of equal protection under the Due Process Clause of the Fifth Amendment and is contrary to the long-established precept that the definition and regulation of marriage is within the authority of each state. According to the ruling, “DOMA’s principal effect is to identify and make unequal a subset of state-sanctioned marriages. It contrives to deprive some couples married under the laws of their State, but not others, of both rights and responsibilities, creating two contradictory marriage regimes within the same State.”

The Court’s ruling is limited only to those same-sex marriages lawfully performed in a state. The Court did not decide whether there is a constitutional right to same-sex marriage.

States Rights
States have historically been responsible for regulating and defining marriage and this ruling does not change that. Currently, 12 states (Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington) and the District of Columbia will issue a license for a same-sex marriage.

The Court’s ruling does not require any state to allow same-sex marriages or recognize same-sex marriages performed in another jurisdiction. Basically, federal law will now look to state law to determine whether a same-sex couple is legally married.

Impact on Employee Health & Welfare Benefits
As a result of this ruling, the terms “spouse” and “marriage as used in federal laws and regulations will encompass both opposite-sex and same-sex spouses. This will impact a variety of benefit plan laws and regulations, including ERISA, COBRA, HIPAA, FMLA and provisions of the Internal Revenue Code (IRC).

Employers that provide health coverage to same-sex spouses are not permitted to provide this benefit on a tax-favored basis (i.e. no imputed income). However, imputed income will continue to apply in certain cases if health coverage is provided to a same-sex partner who is not a legal spouse (e.g. domestic partner). It is not clear whether imputed income applies to same-sex spouses who reside in states that do not permit or recognize same-sex marriages.

Same-sex spouses are now considered COBRA qualified beneficiaries entitled to health coverage continuation when certain COBRA qualifying events occur. In addition, HIPAA Special Enrollment Rights will apply to a same-sex spouse. Under IRC section 125, salary reduction contributions will be permitted for the cost of spousal coverage, consistent with the treatment for an employee who covers an opposite-sex spouse. Finally, qualified medical expenses of same-sex spouses will be eligible for tax-free reimbursement from and employee’s health care flexibile spending account, health reimbursement arrangement or health savings account.

Next Steps
It is likely that additional guidance will be forthcoming on some of the practical implications of the demise of DOMA. In the interim, plan sponsors and employers should consider the following initial steps with regard to federal recognition of same-sex marriages:

  • Review plan documents/insurance contracts to determine how spouse is defined and whether modification is needed;
  • Modify processes and procedures with respect to spouses in lawful same-sex marriages; and
  • Discontinue imputing income to an employee who covers a same-sex spouse (obtain supporting documentation as needed).