American Benefits Council
Benefits Byte


June 29, 2015

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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Supreme Court Decision in Obergefell v. Hodges, Implications for Benefit Arrangements

On June 26, the U.S. Supreme Court issued its decision in Obergefell v. Hodges, legalizing same-sex marriage nationwide. The decision should help reduce administrative burdens on employers regarding spousal benefits but also has implications for domestic partner benefits.

At issue in the case was whether a state can refuse to issue a same-sex marriage license or refuse to otherwise recognize a same-sex marriage performed in another state.  The Court concluded that the Equal Protection and Due Process Clauses of the Fourteenth Amendment to the U.S. Constitution prohibit a state from refusing to recognize same-sex marriage on the same terms as opposite-sex marriages performed in, or recognized by, the state.

Writing for the majority, Justice Kennedy began by “emphasiz[ing] that religions, and those who adhere to religious doctrines, may continue to advocate with utmost, sincere conviction that, by divine precepts, same-sex marriage should not be condoned.”  He went on to note that, “[t]he First Amendment ensures that religious organizations and persons are given proper protection as they seek to teach the principles that are so fulfilling and so central to their lives and faiths, and to their own deep aspirations to continue the family structure they have long revered,” and that, “the same is true of those who oppose same-sex marriage for other reasons.”  Notwithstanding this, Justice Kennedy concluded that, “[t]he Constitution, however, does not permit the State to bar same-sex couples from marriage on the same terms as accorded to couples of the opposite sex.”

Over time, Obergefell should help reduce the administrative burdens on employers in connection with same-sex spousal benefits.  For example, Obergefell appears to now require state tax laws to mirror federal tax law and make excludable from an employee’s wages any employer paid coverage for an employee’s same-sex spouse, to the extent the state accords the same tax treatment for opposite-sex spousal coverage.  However, whether the change in state law tax treatment will apply retroactive to January 1, 2015, or earlier, may depend on each state’s actions in the wake of Obergefell.  The decision may also lead some employers to revisit their decision to provide domestic partner benefits.

In addition to the above, Obergefell could have other implications for employers’ benefit arrangements. With respect to insured arrangements, to the extent a state’s insurance law requires a health insurer to make available coverage to an enrollee’s opposite-sex spouse, such law would seem to now require that the insurer also make available coverage to an enrollee’s same-sex spouse.  With respect to self-funded plans, it appears that employers could limit access to benefits to an employee’s opposite-sex spouse; however, it is possible that such eligibility terms could subject the employer to increased litigation risk based upon a claim of sex discrimination under Title VII of the Civil Rights Acts.

The Court’s decision in Obergefell follows upon its prior decision in U.S. v. Windsor, in which the Court declared unconstitutional Section 3 of the Defense of Marriage Act (“DOMA”), which limited marriage for federal law purposes to opposite-sex marriage.  As a result of the Windsor decision, for purposes of federal law, the terms “spouse” and “marriage” now include same-sex spouses.  Significantly, the Windsor decision did not address the treatment of same-sex marriages for purposes of state law.  Friday’s ruling addresses this latter issue, with (as noted above) potential implications for employer-sponsored arrangements.

For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

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