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Employee Benefits after DOMA

NCCMP 2013 Annual Conference. Employee Benefits after DOMA. Joyce A. Mader O ’ Donodgue & O ’ Donoghue LLP Washington, DC September, 2013. #199040. US v Windsor , US Supreme Court June 26, 2013.

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Employee Benefits after DOMA

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  1. NCCMP 2013 Annual Conference Employee Benefits after DOMA Joyce A. Mader O’Donodgue & O’Donoghue LLP Washington, DC September, 2013 #199040

  2. US v Windsor, US Supreme CourtJune 26, 2013 • Struck down Section 3 of Defense of Marriage Act (DOMA) that denied federal benefits to legally married, same-sex couples. • Section 3 of DOMA which defined all references to “spouses” or “marriage” in federal law or regulations to include only opposite-sex couples was found to be unconstitutional and a “deprivation of liberty of the person protected by the Fifth Amendment”. • DOMA improperly attempted to interfere with states’ recognition of same sex marriage, treated such marriages as 2d class and was motivated by animus.

  3. §2 of DOMA not at Issue in Windsor • Allows states to refuse to recognize validity of same-sex marriages legally performed in other states. • For example, this allows Virginia to refuse to recognize a same-sex marriage performed in Maryland even though Virginia would be required to recognize an opposite-sex marriage performed in Maryland.

  4. State and Federal Regulation of Marriage • Before DOMA-regulation of marriage was generally determined by state law. (Example: common law marriage.) • Federal law looked to state law to determine marital status. (See Revenue Ruling 58-66) • DOMA created a federal definition of marriage for any federal benefit or federally regulated benefit under IRC and ERISA limited to opposite gender couples.

  5. State and Federal Regulation of Marriage • Post-Windsor – Agency guidance: • IRS/Treasury will recognize a same-sex marriage that was legally valid where it was performed for all federal tax purposes (including employee benefits). (Rev Rul 2013-17) • DOL will recognize same-sex marriages on the same basis as IRS for purposes of the provisions of ERISA and related DOL and IRS regulations over which it has authority. (Technical Release 2013-04)

  6. State and Federal Regulation of Marriage • Post-Windsor – agency guidance: • DOL Wage & Hour Division for FMLA purposes- “Spouse” is based on the law of the state where the employee resides. (See DOL Wage & Hour Division Fact Sheet 28F” • Social Security Administration – recognizes same-sex spouses married in a state that recognizes such marriages and “domiciled at the time of application, or while the claim is pending a final determination, in a state that recognizes same sex marriage”.

  7. Impact on Pension Plans • Pension Plans are creatures of federal tax law so IRS Guidance provides most of the answers. • Plans were required to implement modified definition of “spouse” and “marriage” effective September 16, 2013. • IRS extended position it has taken on common law marriage since 1950’s. • Future guidance will address content and timing of plan amendments, operational corrections and retroactivity.

  8. Impact on Pension Plans • Pension Benefits affected: • Qualified Joint and Survivor Annuity • Qualified Pre-retirement Survivor Annuity • Spousal Consents/Waivers • Qualified Domestic Relations Orders • Beneficiary Designations • Minimum Required Distributions • Hardship Distributions

  9. Impact on Health Plans • The benefits of health plans are not regulated by Federal law. Health plans are not required to cover any spouses. • Whether a health plan could cover opposite-sex spouses but not same-sex spouses is an issue of state law. • Unlikely to be preempted by ERISA; may be unlawful even in some states that do not recognize same-sex marriage. • Increased likelihood of legal challenges after Windsor.

  10. Impact on Health Plans • If same-sex spouses are covered— • Value of benefit not federal taxable income. • May be state taxable income. • Same-sex spouses and children of same-sex couples have COBRA and HIPAA Special Enrollment Rights

  11. Impact on Other Welfare Plans • FMLA – same-sex spouses are entitled to leave (but based on residency) • The following welfare benefits likely must be made available to same-sex spouses on the same basis as opposite sex spouses: • FSA/HSA/HRA/Cafeteria Plans. • Wellness Programs

  12. Administrative Issues • Pension • September 16, 2013 implementation • Identifying same-sex spouses/communications. • Any retroactive actions required by future guidance.

  13. Administrative Issues • Health and Welfare • If same-sex spouses are covered on the same basis as opposite-sex spouses: • State tax issues • Any issues as a result of SSA and FMLA state of residency rule. • Identifying same-sex spouses/communications. • If same-sex spouses are not covered on the same basis as opposite-sex spouses: • Likely legal challenges.

  14. Other Issues/Questions

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