Document Archive > The U.S. Supreme Court – Two Historic Decisions

The U.S. Supreme Court – Two Historic Decisions:
DOMA: Unconstitutional
Proposition 8: Same-Sex Marriage Now Available in California

These two much anticipated U.S. Supreme Court rulings were issued this morning. Both decisions will have a significant effect on employee benefits. This Memorandum includes a brief discussion of each case followed by comments on the impact for health and welfare plans and an Action Plan.

Proposition 8 Case (Hollingsworth v. Perry)

1.      Background. In 2000, California passed a state law limiting marriage to opposite-sex couples. In 2008, the California Supreme Court struck down the law as violating the state’s constitution. Later that same year, voters passed a ballot initiative (“Proposition 8”) which amended the state constitution to provide that the word “marriage” could only refer to opposite-sex unions. This meant that although state law gave same-sex couples all of the same rights and benefits of opposite-sex couples, same-sex couples could only have “domestic partnerships,” while opposite-sex couples could have “marriages.”

2.      The Case. Several same-sex couples who wished to marry brought suit, claiming that Proposition 8 violated the federal constitution. The plaintiffs named various state officials as defendants. The officials refused to defend the law, so the federal district court permitted the proponents of Proposition 8 (the “Proponents”) to intervene as defendants. The district court found Proposition 8 unconstitutional. The Proponents appealed to the Ninth Circuit, which affirmed the district court’s decision. Earlier today, the Supreme Court found that the Proponents did not have the right to appeal to the Supreme Court. The Court vacated the Ninth Circuit’s opinion and ordered the appeal dismissed for lack of jurisdiction. Because the district court did have jurisdiction, its opinion still stands. Thus, Proposition 8 is unconstitutional and same-sex marriage is legal in California. Note: There is an automatic 30 day stay, in such cases, delaying the effective date for new marriages.

 DOMA Case (U.S. v. Windsor)

1.      Background. Historically, issues of marriage and family were the purview of the states. As a result, when a federal law referred to a “marriage” or a “spouse,” those terms would typically be defined by state law. The Supreme Court noted that states have an historic and essential authority to define the marital relationship in order to serve its community. The employer should be able to look to state law to see who could and could not be considered a “spouse.”

The Defense of Marriage Act (“DOMA”) changed that right in 1996. Under DOMA, the words “marriage” and “spouse,” when appearing in a federal statute or regulations, could not be interpreted according to state law. Instead, “marriage” had to be interpreted as the marriage of one man and one woman, and “spouse” had to be as someone married to a person of the opposite gender. For employers, DOMA meant that when an employer provided benefits to employees’ spouses, the employer was largely free to disregard state laws recognizing same-sex marriages.

 

2.      The Case. Ms. Windsor and Ms. Spyer married in Canada. Eventually, the couple moved to New York, where their marriage was recognized as legal. When Ms. Spyer died, Ms. Windsor was unable to use the spousal deduction on her federal estate taxes because, under DOMA, she was not a “spouse” for federal tax purposes. Ms. Windsor sued, arguing (among other things) that DOMA was unconstitutional. The Supreme Court agreed, striking down DOMA. According to the Court, the states that permit and recognize same-sex marriages have given benefits and protection to same-sex spouses. In the Court’s view, DOMA deprived same-sex couple of those benefits and protections. The Court found DOMA unconstitutional because “the principal purpose and the necessary effect of this law are to demean those persons who are in a lawful same-sex marriages.” It is important to note that the Court did not find a constitutional right to same-sex marriage. For now, states are free to define marriage as they see fit and are not required to recognize same-sex marriages performed in other states.

Employee Benefits Issues

1.      Plan Eligibility. In the absence of DOMA and the resuscitation of the same-sex marriage law in California, plan sponsors and insurance policy issuers must now define “spouse” to include California-based same-sex spouses as eligible spouses.

2.      Domestic Partnerships. Although there may be a significant reduction in the number of Registered Domestic Partnerships (RDPs) now that marriage is, once again, an option, RDPs remain subject to imputed income rules, inter alia. Similarly, their rights under California laws as RDPs remain as they are today, pending any further action by the California legislature.

3.      Multi-State Employers. Multi-state employers with California sitused insurance policies should recognize same-sex marriage only in the states where state laws regarding same-sex marriage exist.

4.      Impact on Existing Imputed Income, Enrollment Rights, Etc. It is our current understanding that the abolition of DOMA will not affect the existing imputed income collected so far in 2013.

5.      FMLA and Other Leave Policies. To the extent that leave policies were previously limited to taking leave to care for one’s spouse, we expect that employers will permit employees to take leave to care for one’s same-sex spouse.

6.      New Marriage. Since many same-sex couples may be getting married in the near future and since marriage is a qualifying event under benefit plan eligibility rules and Section 125 plans, employers should allow enrollment rights.

Action Plan

1.      Review all existing plan eligibility rules and practices.

2.      Contact existing insurers and TPAs who currently administer Section 125 and COBRA benefits to set a strategy for existing same-sex spouses, if needed.

3.      Review your ACA and 2014 strategies, and your potential risks under the pay or play provisions.

4.      Be sure to include covered domestic partners and currently eligible same-sex marriage partners in your PCORI fee calculation, payment due July 31, 2013.

 

We expect more news emerging on these two Court decisions. We will keep you informed of items that impact employee benefit plans.