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How Will The Defense of Marriage Act Ruling Affect Your Plan?

09/05/13

  03:49:18 pm, by MedBen5   , 757 words,  
Categories: News, Health Plan Management, Health Care Reform

How Will The Defense of Marriage Act Ruling Affect Your Plan?

Supreme Court

In June, the United States Supreme Court handed down its ruling in United States v. Windsor – the highly publicized Defense of Marriage Act (DOMA) case. While the Supreme Court’s ruling was very specific regarding changes required in the areas of the law it addressed (i.e., inheritance tax issues for same-sex spouses), there are still many questions as to the application of this decision to employee benefit plans – predominantly group health benefit plans.

The Supreme Court’s opinion dealt only with the constitutionality of Section 3 of DOMA – the section that defined marriage as “between one man and one woman” – and the application of that definition to inheritance taxes. What is missing is clear guidance as to how this decision applies to spousal coverage under employee benefit plans – particularly whether or not health and retirement plans must be amended to make same-sex spouses in these plans eligible for coverage. This question is particularly vexing in states that already recognize same-sex partners. Several entities, including the American Benefits Council, have made formal requests of the Tri-Agencies (HHS, IRS, DOL) to issue interpretive guidance on this very issue.

Making things even more confusing are the many attorney newsletters and blog postings interpreting the Supreme Court’s decision for group health plans. In some cases, these firms have indicated that, for self-funded plans in states that do NOT recognize same-sex spouses (such as Ohio), plan sponsors will now be forced to decide whether they will cover any spouses at all. It is their contention that if these employers do cover ’spouses’ but continue to exclude same-sex spouses, the employer may risk litigation or discriminatory action – particularly if the plan specifically states that only opposite-sex spouses are covered. Such language could be determined, through litigation, to violate the Supreme Court’s ruling.

While we await further guidance on the spousal eligibility question, there are a host of other issues that will have to be reviewed in light of the decision. These are as follows:

Health Care Coverage, FSAs, HRAs, HSAs. Prior to the ruling, employees could contribute to their health care on a pre-tax basis but could only include their same-sex spouses on an after-tax basis. Under the ruling, the tax treatment of same-sex spouses may have to be the same. Accordingly, no income, FICA or FUTA taxes would be levied on the employer-provided covered benefits of same-sex spouses. We have also heard (but not confirmed) that employers may be entitled to a refund of their share of any FICA and FUTA taxes paid and employees may be entitled to a refund of their share of both FICA taxes and income taxes if the employer-sponsored health plan covered same-sex partners and imputed the value of the employer-paid health care as additional income.

COBRA Continuation Coverage. Currently, COBRA-mandated health care continuation coverage is only available in the event of a qualifying event that results in a loss of coverage to spouses of the opposite sex. Under the ruling, COBRA coverage may have to be made available to a same-sex spouse on the same terms as an opposite-sex spouse.

HIPAA Special Enrollment Rights. Under the Health Insurance Portability and Accountability Act of 1996, employees covered by their employer’s group health plan must be given a special enrollment right to add an opposite-sex spouse if they marry during the coverage period. Under the ruling, this special enrollment right may have to be extended to same-sex spouses.

FMLA. Under the Family Medical Leave Act, employees can take up to 12 weeks of unpaid leave of absence without the loss of their job to take care of certain relatives including an opposite-sex spouse. Under the ruling, this protection may be extended to a covered employee taking an unpaid leave to take care of his or her same-sex spouse.

Dependent Care Assistance. Currently, employer-provided dependent care assistance enjoys pre-tax treatment if used to pay for qualifying dependent care assistance expenses of dependents, including an opposite-sex spouse. Under the ruling, this tax treatment may have to be extended to a same-sex spouse.

MedBen will update clients with any information the federal government puts out regarding this matter, including any interpretive guidance, regulation or transitional relief. Guidance may also be forthcoming from individual states as they interpret their current laws and pending legislation in light of this decision. For your information, here are the states that have same-sex marriage laws and those that may pass such legislation in the near future.

Same Sex Marriage States

Clients with questions regarding this matter may contact MedBen Vice President of Compliance Caroline Fraker at cfraker@medben.com.

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