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Employee Benefits Post-Obergefell:“We Now Pronounce Your Benefits Program In Need of Revision!”

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Same-Sex Marriage: Recent History

Pre-May, 2004

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Prior to May, 2004:• DOMA (the Defense of

Marriage Act) was the

applicable federal

law since September,

1996 when it was

signed into law by

President Clinton.

• No state permitted

same-sex marriage.



May, 2004

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Massachusetts:• On May 17, 2004

Massachusetts

became the first

state in the USA

to legalize

same-sex

marriage.



May, 2008

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California:• On May 15, 2008

the California

Supreme Court

issued a ruling

invalidating a

state law prohibiting

same-sex marriage.

A month later,

marriages began.

• This began a

five-year odyssey

that included a

state Constitutional

Amendment (Prop 8)

which was finally ruled

unconstitutional by

SCOTUS in 2013.



October, 2008

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Connecticut:• On October 10, 2008

the Connecticut

Supreme Court

ruled that same-sex

couples are entitled

to marry.

• The ruling was

retroactive to

October 1 and

effectively converted

all state-registered

civil unions in Connecticut

to marriages automatically.



April, 2009

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Iowa:• On April 27, 2009

a ruling by the Iowa

Supreme Court

goes into effect,

allowing same-sex

couples to marry.



September, 2009

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Vermont:• Four days after Iowa’s

Supreme Court rules,

the Vermont state

legislature cast an

overwhelming vote

to override the

Governor’s prior

veto, allowing same-

sex couples to marry.

• On September 1, 2009

couples begin to marry

in the Green Mountain

State.



January, 2010

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New Hampshire:• On June 3, 2009, New

Hampshire’s governor

signs a freedom to

marry bill passed

by both houses of

state government

into law.

• On January 1, 2010

New Hampshire

same-sex couples

began to marry.



July, 2011

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New York:• On June 24, 2011, New

York governor Andrew

Cuomo signs a

freedom to marry

bill into law.

• This more than

doubled the number

of American citizens

living in a state with

same-sex marriage.

• Same-sex couples

began to marry one

month later, on July 24.



Nov, 2012-Jan, 2013

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Washington, Maine

and Maryland:• In Washington state,

a law signed February

of 2012 is challenged

and referred to the

ballot in November.

The effort to block

the law is futile, and

December 3, same-

sex couples begin to

marry.

• A Maryland law follows

a similar course and takes

effect January 2013.

• The Maine same-sex marriage

law takes effect December 29, 2012.



June 26, 2013

United States v. Windsor &

Hollingsworth v. Perry:• In US v. Windsor, SCOTUS struck

down Section 3 of the Defense

of Marriage Act (“DOMA”), the

1996 law that denied legally

married same-sex couples more

than 1,100 legal protections and

responsibilities applicable to

heterosexual marriage.

• In Hollingsworth v. Perry, SCOTUS

ruled that the proponents of

California’s Proposition 8 lacked

standing to challenge the lower

court’s invalidation of that law,

effectively restoring full marriage

rights to California same-sex

couples.

AND NOW, A WORD FROM THE “SUPREMES”:



July-August, 2013

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Delaware, Rhode Island

& Minnesota:• On April 24, 2013,

the Governor of

Rhode Island signs

a same-sex marriage

bill into law. It takes

effect August 1, 2013.

• On May 7, 2013, the

Governor of Delaware

signs a same-sex

marriage bill into law.

It takes effect July 1, 2013.

• On May 14, 2013, the

Governor of Minnesota signs

a same-sex marriage law.

It takes effect August 1, 2013.



Oct, 2013-Feb, 2014

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New Jersey, Hawaii

New Mexico & Illinois:• On October 21, 2013,

same-sex couples

began marrying in

New Jersey.

• On November 13,

2013, same-sex

couples in Hawaii

began to marry.

• On November 20, 2013,

the Governor of Illinois

signs a same-sex marriage

law. It takes effect February,

2014.

• On December 19, 2013,

New Mexico’s Supreme Court

affirms the right

of same-sex couples to marry.



May, 2014

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Oregon & Pennsylvania:• On May 19, 2014, a US

District Judge in Oregon

strikes down the state

law banning same-sex

marriage. The state

declines to appeal

and same-sex couples

begin marrying

immediately.

• The following day,

the same events occur

in Pennsylvania and it

becomes the 19th state

permitting legal same-sex

marriage.



October, 2014

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SIXTEEN MORE STATES:• On October 6, 2014,

SCOTUS denies review in

five different same-sex

marriage cases.

• The effect of SCOTUS’s

refusal to review is to

make same-sex

marriage legal in: Utah,

Oklahoma, Virginia,

Indiana, Wisconsin,

Colorado, Kansas,

North Carolina, South

Carolina, West Virginia

and Wyoming.

• The following day, a 9th Circuit

reversal joins Nevada, Montana,

Idaho, Arizona and Alaska in “the party.”



Jan-Feb, 2015

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Florida and Alabama:• On January 6, 2015,

a stay on a previous

federal court ruling

expires; as a result

hundreds of same-sex

couples in Florida

begin to marry.

• On February 9, 2015,

SCOTUS denies an

appeal by Alabama’s

Attorney General and it

becomes the 37th state to

legalize same-sex marriage.



June 26, 2015

Obergefell v. Hodges:• In Obergefell v. Hodges, SCOTUS

struck down marriage bans inthe remaining 13 states andsettled the issue of same-sexmarriage nationwide.

• Obvious corollaries of thisdecision include:

• The “full faith and credit”clause of the Constitutionrequires every state to honormarriages performed in everyother state, including same-sex marriages.

• Same-sex married couplesmay now file jointly ontheir tax returns in every stateor locality in the US.

AND NOW, ANOTHER WORD FROM THE “SUPREMES”:



June 26, 2015

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Obergefell v. Hodges:• As a result of the 5-4

decision in Obergefell

same-sex marriage is

considered legal in all

50 states.

• However, local

officials in some

(mostly rural) counties

in Louisiana and

Mississippi have

announced their

intention to ignore the

law until SCOTUS rules

on an expected motion

for reconsideration.


Poll #1


Marriage Equality: Benefits Impact

• Retirement Plans (DB or DC)

– (ERISA Plans) Qualified Joint & Survivor Annuities (QJSAs) and

Qualified Preretirement Survivor Annuities (QPSAs)

• Alternate form of payment tables need to reflect “M/M” and “F/F”

payment models, not just “M/F” and “F/M”.

• Waivers of default QJSA/QPSA option valid only if spouse consents.

• Many plans don’t allow for waiver of QPSA at all if entirely plan-

subsidized.

– Government Plans: QJSA/QPSA not required.

– Church Plans: QJSA/QPSA not required.




– (ERISA Plans) Payment of Account Balance in Full at Death of

Employee

• Defined contribution plans must either offer the same QJSA/QPSA

defaults as on the previous slide, OR provide that 100% of the

participant’s account balance be paid to the surviving spouse.

– Government Plans: Account balance paid-on-death requirement

does not apply to these plans.

– Church Plans: Account balance paid-on-death requirement does

not apply to these plans.




– (ERISA Plans) Rollover Distribution Rights

• If a participant dies, a beneficiary has a right to roll over the balance

of the plan to another retirement plan or an IRA. If the beneficiary

was a non-spouse at time of participant’s death, then that rollover is

limited solely to an inherited IRA. A spouse at time of participant

death may roll over to any qualified retirement plan or IRA.

– Government Plans: Same rights as for ERISA plans.

– Church Plans: Same rights as for ERISA plans. This means that

church plans must allow rollover by same-sex spouses to any

qualified plan, even if the church does not recognize same-sex

marriage doctrinally.




– (ERISA Plans) Plan Loans

• If a participant is married, the spouse MUST consent to any

participant-initiated plan loan.

– Government Plans: Spousal consent rules do not apply.

– Church Plans: Spousal consent rules do not apply.




– (ERISA Plans) Qualified Domestic Relations Orders

• A QDRO, or qualified domestic relations order, is a court-ordered

division of current or future benefits from a retirement plan, usually

imposed in the case of a divorce-related division of assets. Same-

sex spouses qualify for QDROs on a basis equal to different sex

spouses.

– Government Plans: While there is no requirement for a

government plan to recognize a QDRO, many plans are drawn

to do so.

– Church Plans: No requirement for a church plan to recognize a

QDRO.




– (ERISA Plans) Required Minimum Distributions & Tax Withholding

• RMD (Required Minimum Distribution) rules have more flexibility

when the beneficiary is a spouse than when a child or other non-

spousal beneficiary is receiving it. Same-sex spouses must be

permitted to elect married status for tax withholding purposes, for ALL

US tax jurisdictions (federal, state and local.)

– Government Plans: Same rules as ERISA plans.

– Church Plans: Same rules as ERISA plans.



• Health Plans

– (ERISA Plans) ACA Employer Mandate & Required Coverage Offers

• The ACA DOES NOT require spousal coverage.

• However, if spousal coverage is offered, it MUST extend to include

same-sex spouses.

• The ACA DOES require dependent coverage other than spouses (i.e.,

children to age 26.)

• The definition of a dependent child under ACA DOES NOT include

stepchildren or foster children (despite SHRM posting to the contrary.)

• So legal adoption status of each child becomes determinative.





• Health Plans

– (All Plans) Taxability of Contributions (IRC §125)

• Situation Prior to Windsor (Pre-June 26, 2013)– Contributions for partner share of coverage NOT pre-tax and employer cost of coverage

was imputed income to the employee at Federal level (due to DOMA controlling.)

– Contributions for same-sex spouse share of coverage COULD be pre-tax at State level

for those states permitting same-sex marriage, depending on the state.

• Situation Post-Windsor/Pre-Obergefell (June 26, 2013 to June 26, 2015)– Contributions for partner share of coverage pre-tax and employer cost of coverage was

NOT imputed income to the employee at Federal level (if legally married by any state –

did not need to be employee’s state of residence.)

– Contributions for same-sex spouse share of coverage COULD be pre-tax at State level

for those states permitting same-sex marriage, depending on the state.

• Situation Post-Obergefell (Post-June 26, 2015)– Legally married same-sex couples enjoy all tax rules applicable to different-sex couples,

at the state, federal and local (city, county, school district) level.

– Same-sex couples who are associated in any lesser relationship than legally recognized

marriage (common-law spouses, registered domestic partnerships, civil unions) do NOT

enjoy these same tax benefits. Imputed income on partner benefits apply.


Poll #2



• Health Plans

– (All Plans) Taxability of Contributions (IRC §125)

• Awaiting IRS and 13 States’ Guidance: The “Known Unknowns”– In the wake of Windsor, the IRS issued detailed guidance (Revenue Ruling 2013-17,

Technical Release 2013-04 and IRS Notice 2014-01) on issues like:

» Effective date of all provisions and retroactivity

» Qualifying Life Events (mid-year election changes) under Cafeteria Plans

» FSA reimbursements (for expenses incurred by the spouse)

» Retroactive Requests for Tax Refunds (for imputed income imposed) and the

need for amended tax returns

» Contribution limits for DCAPs and HSAs

» Need for written plan amendments (or not)

– Now that the Obergefell decision has issued, we expect similar (but not identical)

guidance (this time additionally from each of the 13 states most impacted by

Obergefell), which has not yet been announced:

» What is the effective date of various changes? Are they retroactive?

» Must states refund taxes attributable to imputed income?

» Are written plan amendments required?


Poll #3



• Health Plans

– Is Your Domestic Partnership Affidavit In Need of a “Face-Lift?”

• Pre-Windsor, domestic partnership affidavits were modeled to include

certain key, required elements:– Two (sometimes more) documents proving partnership: a common lease or real estate

purchase document, joint bank accounts, etc.

– Affirmation that the signers were not married to anyone else and that they were in a

“committed, long-term” relationship

– Affirmation that they lived in a jurisdiction that did not permit legal same-sex

marriage, and that “but for” that legal bar, they would be married.

– Now what?

• Do you eliminate that clause? Or eliminate the domestic partnership

provision of your plan altogether?– There is no legal requirement to eliminate domestic partner coverage simply because

marriage equality is the law.

– There may be excellent competitive, employment brand, and/or employee engagement

reasons to retain the provisions.

– An additional consideration: unmarried heterosexual cohabitants. Does some concept

of “reverse discrimination” attach to the policies?



• Health Plans

– (ERISA Plans) COBRA Continuation and Life Event Changes

• A same-sex spouse who loses coverage due to an employee’s

termination of employment is entitled to 36 months of COBRA

continuation coverage, just as an opposite-sex spouse would be.

• A same-sex spouse losing coverage under his/her own employer’s plan

constitutes a life event entitling them to immediate coverage under their

spouse’s plan under the same conditions that an opposite sex spouse

would enjoy that privilege.





• Health Plans

– (All Plans) Dependent Care Assistance Plans (DCAPs)

• The “Qualifying Person” Test: dependent care assistance can only be

provided for a qualifying person. A same-sex spouse is a qualifying

person if he/she is not physically or mentally able to care for him-

/herself and lived with the employee for more than half the year. Note

that DCAPs generally are not required to, but may, classify a spouse

as a qualifying person. If different-sex spouses are included in the

DCAP’s definition of a qualifying person, then the implication of the

Obergefell decision would be that same-sex spouses must also be

included.

• The “Payee” Test: Benefits cannot be reimbursed under a DCAP is

they are paid to the spouse of the employee (same-sex or opposite-

sex.)


Marriage Equality: The “Next Frontier”

• One Last Map to Consider

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In the Red-Shaded States:• An employee can take PTO one

morning, go out and legally get

married to someone of the

same sex…

• …come back to work in the

afternoon, proudly put a

wedding picture on their desk…

• …then be called into their

Supervisor’s office, told that

the picture was ‘inappropriate,”…

• …be summarily fired for no reason

other than they are lesbian, gay,

bisexual or transgender…

• …ALL 100% LEGALLY.

Note: NY, NH and WI protect employees based on

“GLB” status but not gender identity (“T” status.)



• A Brief History of Sexual Orientation Non-Discrimination

Protection Efforts

– Title VII of The Civil Rights Act of 1964

• The bill was originally proposed to prohibit discrimination in

employment on the basis of race, color, religion and national origin.

• An avowed segregationist Senator proposed an amendment to include

gender as a protected class, figuring that would kill the bill for good.

• To his chagrin, the law passed, with gender included as a basis for

protection. (Oooops!)

• Later amendments to the law have added several protected classes:

older workers and those with disabilities in particular.

• The law has never protected LGBT workers.

• ….Yet, in recent surveys, an astounding 90% of those surveyed

erroneously thought that federal law DID protect LGBT employees

from discrimination. The same percentage did not know whether

their state had any LGBT employment protections in place.



• A Brief History of Sexual Orientation Non-Discrimination

Protection Efforts

– ENDA (The Employment Nondiscrimination Act)

• Has been introduced in every Congress since the 103rd (1994) – except

the 109th.

• Came closest to passing in 1996, when it failed by one vote in the

Senate.

• Most recently passed in the Senate (2013) but died in the House.

– In a decision of the EEOC, on July 15, 2015:

• A 3 to 2 majority of the Commissioners ruled that

discrimination on the basis of sexual orientation necessarily also states a

claim based on gender discrimination and is therefore barred by Title VII.

• The decision is binding only on federal employees’ claims directly, but is

advisory for all other EEOC offices and therefore private employers as

well. EEOC decisions are given significant deference by all federal

courts.


Questions?


Ascentis HR includes highly flexible, table-defined Benefits

Administration capabilities for maintaining all plans: health,

welfare, wellness, PTO, and retirement.

Table-Driven – Change to the definition of a dependent?

Redefine it! Change to the taxability of a contribution type?

Easy.

Online Enrollment – Whether open enrollment, new hire

enrollment or life event re-enrollment, Ascentis has the

capability, with highly configurable, intuitive pages, easily

embedded content like SBCs and provider directories, and

mobile access capabilities.

ACA Compliance – Your concerns around tracking variable

hour employee eligibility, affordability monitoring, and year-end

1094/1095-c reporting are handled – fully and automatically.

Can Ascentis Help Me?


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by Aug 27


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employee benefits post-obergefell · pa md de nj ct ri ma me vt nh ak hi delaware, rhode island...

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