How the DOMA Decision Affects Employee Benefit Plan Sponsors

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May 20, 2014

This morning, in a 5-4 decision, the United States Supreme Court ruled in United States v. Windsor that the federal Defense of Marriage Act (DOMA) is unconstitutional. On equal protection grounds, the Court held that if a state has recognized same sex marriages, then the federal government must honor those marriages with respect to federal benefits such as social security.

The impact on benefit plan sponsors might not be immediately apparent, because many may be of the belief that for federal tax and benefit purposes, the federal statute defines who a spouse is. However, both the federal tax code and Social Security laws have long provided that for purposes of those federal benefits, whether an individual is a “spouse” depends on state law. This is why DOMA was so significant upon enactment, it in effect said that notwithstanding how a state decides to define marriage, the federal government was not going to recognize any state’s marriage law to the extent it legalized same sex marriage for purposes of any federal benefits.

Today’s decision does not require states to recognize same sex marriages. But what it does say is that if a state does decide to recognize them, then the federal government must consider those marriages to be valid for purposes of all federal laws and benefits for which the definition of spouse is a creature of state law. Social Security benefits are a prime example. Federal tax laws are another. Even ERISA is implicated. Qualified retirement plans are required under ERISA to provide spousal protections which would now be available to same sex spouses in states where same sex marriage is recognized. For example, if a 401(k) plan participant is legally married to a same sex spouse under the state law where the employee resides, then the spouse has the right to be the beneficiary of the employee’s account unless the spouse consents to another beneficiary designation. Health coverage provided to a same sex spouse would also be nontaxable (again, only if the couple resides in a state which recognizes their marriage).

Wisconsin does not recognize same sex marriage. Today’s decision does not require it to do so. But Wisconsin employers still must consider whether they have employees who are legally married to same sex spouses where the marriage must now be recognized for purposes of employee benefit plans.

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