Next Steps for Employers – Compliance with DOMA After United States v. Windsor

Kelley Drye Client Advisory

On June 26, 2013, the Supreme Court ruled that Section 3 of the federal Defense of Marriage Act (“DOMA”), which defined marriage as the union between a man and a woman for purposes of federal law, is unconstitutional.  In the 13 states (and the District of Columbia) that currently recognize same-sex marriage, same-sex spouses will now have access to the same rights that opposite-sex spouses enjoy under more than 1,000 federal laws and regulations that refer to marital status.

The decision will trigger significant policy and benefits changes for employers that sponsor retirement, fringe benefits, and health care plans for employees legally married in these states as well as administrative changes to employers’ payroll systems and withholding practices.  The decision does not, however, on its face, impact individuals in same-sex domestic partnership relationships or civil unions.

Pending guidance from federal and state regulators, employers should prepare to take the next steps in order to comply with the Supreme Court’s ruling:

Specifically with respect to Retirement Benefit Programs:

  • Employers operating in multiple jurisdictions that do and do not recognize same-sex marriage should evaluate how to best implement any necessary changes in employee communications, amending plan documents and coordinating plan administration.  The federal government should be providing further guidance soon on how to best manage these changes.
  • Conduct an extensive review of retirement plan documents and compliance systems to identify necessary changes to extend benefits to same sex spouses, including spousal consent and survivor annuity requirements.
  • Identify plan provisions defining spouse” or marriage” to reflect similar treatment of both same-sex and opposite sex couples in states that recognize same-sex marriages and determine what changes may be necessary.
  • Review plan procedures, such as QDRO review procedures, to ensure treatment of same-sex spouses are the same as opposite sex spouses where necessary.
  • Modify existing domestic partnership and same-sex marriage collection and recordkeeping processes to reflect equal treatment of all marital relationships.

Specifically with respect to Health and Welfare Benefit Programs:
  • Review all health and welfare plan documents and summary plan descriptions to determine whether amendments are necessary to provisions dependent on marital status such as eligibility, keeping in mind that certain changes will only apply in states recognizing same-sex marriage.
  • For health plans, communicate with plan insurers and/or third-party administrators (“TPAs”) about extending HIPAA, COBRA and other applicable coverage and enrollment rights to qualifying same-sex spouses and their eligible dependents.
  • Prepare a strategy to notify employees of a change in plan eligibility due to DOMA’s repeal, permitting employees to enroll eligible same-sex spouses and their dependents in plans.  This notice should also refer to the right to make mid-year election changes (including enrollment rights) reflecting that, if permissible under plan terms, a change in family status may have occurred as the result of the federal recognition of  same-sex spouses.
  • Plan ahead for 2014 and any communication procedures or plan design changes that may be appropriate in light of the extension of benefits to same-sex spouses.
  • Review medical expense and dependent care reimbursement plan documents to ensure the documents reflect that coverage can now be extended to same-sex spouses or spouse’s children.
  • Evaluate payroll systems and steps necessary to implement pre-tax payment of premiums and to cease additional tax withholdings on imputed income for healthcare coverage to same-sex spouses.
  • Review COBRA, HIPAA, and FMLA policies to ensure same-sex spouses will be accorded the same rights as other qualified spouses.

In addition…
  • Consider whether to implement processes to ensure no adverse employment actions are taken due to disclosures to TPAs and insurers.
  • Modify employee manuals and employee handbooks to reflect similar treatment of same-sex spouses as opposite-sex spouses.
  • Encourage employees with same-sex spouses to revisit their beneficiary designations under all plans including, but not limited to, retirement, life insurance, and other death benefit programs, to ensure they are as intended and also to identify same-sex spouses as spouses on the employer’s records.

As many questions remain unanswered, Kelley Drye & Warren LLP will continue to monitor the further developments in this area.

Contact our Employee Benefits and Executive Compensation group for help reviewing your employee benefit plans, implementing necessary changes, and preparing employee and participant communications regarding the DOMA decision.