Originally posted by Dan Cook on https://www.benefitspro.com
When the U.S. Supreme Court ruled in United States v. Windsor that the federal government is required to recognize same-sex marriages performed in states that allow such marriages, benefits managers started dialing 911.
In an article posted on the Sutherland Asbill & Brennan website, attorneys Vanessa Scott, Carol Weiser, Joanna Myers and Mikka Gee Conway offer considerable guidance on how to amend a benefits plan to meet the implications of Windsor.
Their 10 tips should be read with the understanding that forward-looking plan managers will be anticipating that same-sex marriages will sooner or later be part of the domestic law landscape and will revise their plans accordingly. One major issue currently centers on the state in which a same-sex marriage was performed vs. the state where a same-sex couple resides. But again, assume that residence will eventually prevail for those couples married elsewhere.
Here are their 10 tips:
1. Generally, spousal provisions in an employer’s employee benefit plans, including qualified retirement plans, welfare plans and fringe benefit plans, should apply to same-sex spouses in the same manner as they are applied to opposite-sex spouses.
2. There may be an exception to the general rule above in the case of welfare plans and fringe benefits that define covered “spouses” by reference to the law of a state that does not recognize same-sex spouses or such plans that do not clearly define the term “spouse.” In these cases, plan administrators may still have the authority to interpret the term “spouse” to exclude same-sex spouses. However, it is unclear whether such interpretation might now be considered “arbitrary and capricious” if challenged in litigation following the Windsor decision.
3. Any plan or benefit policy amendment or interpretation that relates to spouses —including prospective verification of spousal status — should be applied to opposite-sex couples in the same manner as same-sex spouses.
4. Plans that do not currently offer spousal benefits at all will not be required to offer spousal benefits as a result of the Windsor decision.
5. For qualified retirement plans, there are implications for application of qualified joint and survivor annuity rules, Internal Revenue Code (Code) section 415 maximums, minimum required distributions, and qualified domestic relations orders. The implications for health plans include the need to offer COBRA to same-sex spouses.
6. Welfare plans that currently offer benefits to same-sex spouses of employees and impute income on the value of the benefit to the employee for federal tax purposes will no longer need to do so. This may require amendments to plan documents and communication materials.
7. Welfare plans that do not impute income on the value of benefits provided to same-sex spouses for state tax purposes in states that allow (or recognize) same-sex marriage will continue this practice. In states that do not allow (nor recognize) same-sex marriage, welfare plans will continue to impute income on the value of benefits provided to same-sex spouses for state tax purposes.
8. It is unclear whether the Windsor decision will have a retroactive impact. Guidance on this issue from federal agencies is anticipated in the coming days and weeks. However, a retroactive application by agencies, such as the Internal Revenue Service (e.g., if the Service reads the Code as if Section 3 of DOMA was never enacted) could be costly, even for plans that currently provide same-sex spousal benefits.
9. Employers will no longer be required to pay FICA taxes on the value of welfare benefits provided to a same-sex spouse. Employers that currently offer same-sex benefits should consider whether they should seek a refund for FICA taxes paid on those benefits during the past three years.
10. The Windsor decision does not require employers to recognize rights granted under “marriage-like” relationships, such as domestic partnerships and civil unions.