September 2, 2014

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Employers Should Review How Plan Documents Define Spouse in Light of Recent Benefits Litigation

Two recent cases challenging benefit eligibility for same-sex spouses highlight the need for employer-sponsored retirement and welfare plans to clearly define "spouse" for eligibility purposes.  Employers may want to review their plan documents to determine whether plan amendments are needed to clarify benefit eligibility for same-sex spouses in light of the upcoming ruling by the Supreme Court of the United States on the constitutionality of the federal Defense of Marriage Act.


Two cases currently pending in the federal district courts for the Eastern District of Pennsylvania emphasize the need for employers to review and understand whether their employee benefit plans clearly define “spouse” for eligibility purposes.

The case Cozen O’Connor v. Tobits was filed in January 2011 by an employer seeking to resolve a dispute over whether benefits under the employer’s profit sharing plan are payable to a deceased employee’s surviving same-sex spouse or parents.  Because the plan document was not clear if “spouse,” for purposes of death benefit payments, included a same-sex spouse, the deceased employee’s parents argued that the Defense of Marriage Act (DOMA) prevents the plan from recognizing the employee’s same-sex spouse despite the fact that the couple had legally married in Toronto in 2006.  The surviving spouse argued that DOMA does not prevent employers from respecting the marriages of same-sex couples and providing equal benefits.  The employer has withheld death benefit payments until the case is resolved.  The court suspended action on the case in September 2012 pending the resolution of other current legal challenges to the constitutionality of DOMA.

Another case, Ginther et al. v. Steelworkers Health And Welfare Plan et al., was filed in February 2013 by an employee challenging his employer’s denial of health coverage to the employee’s same-sex spouse.  The employer’s health plan does not provide clear definitions of “spouse” or “dependent,” thereby exposing the employer to eligibility claims and potential liability under the Employee Retirement Income Security Act of 1974, as amended (ERISA).

In light of these recent lawsuits, and other similar cases, employers should review how “spouse” and “dependent” are defined under their retirement and welfare plans.  Employers that do not clearly define these terms are vulnerable to challenges by same-sex spouses and partners if the employer denies benefits to such spouses and partners.  In particular, employers with employees who work (or live) in jurisdictions that have legalized same-sex marriage should expect to see an increase in requests for spousal benefit coverage from employees who have legally married their same-sex partners.  In addition, providing a clear definition of spouse can help to minimize the risk of competing claims for death benefits under the employer’s retirement plans brought by a deceased employee’s same-sex spouse and the blood relatives who otherwise may be entitled to death benefits under the plan’s default beneficiary rules.  Same-sex marriage is currently legal in nine states and the District of Columbia.  The Rhode Island legislature passed a bill to legalize same-sex marriage on April 24, 2013, which is awaiting the governor’s signature.

DOMA is the federal law that defines marriage as between one man and one woman for all purposes of federal law.  The Supreme Court of the United States is expected to rule on the constitutionality of DOMA in June 2013.  Pending the outcome of the Supreme Court’s ruling, employers can attempt to rely on DOMA’s definition of spouse in administering employee benefit plans plan.  If a plan is properly drafted, the plan administrator’s interpretation of an ambiguous concept should be granted a fair amount of judicial deference.  However, the DOMA definition of spouse does not automatically apply to an ERISA-covered benefit plan absent a specific plan provision saying as much, and plans without a specific definition of spouse are left vulnerable to legal challenges.  If DOMA is upheld by the Supreme Court, employers that wish to limit benefits coverage to opposite-sex spouses should specifically include a DOMA-like definition of spouse in their benefit plan documents and summary plan descriptions.

Given the prevalence of same-sex couples and the growing number of states providing legal recognition of same-sex unions, employers will be well-served to review the use of “spouse” in each of their benefit programs to determine whether the employer intends or is required to cover same-sex spouses and partners.  After the Supreme Court rules on DOMA, employers may want to prepare plan amendments and implement any necessary administrative procedures to clarify benefit eligibility for same-sex spouses and partners.

© 2014 McDermott Will & Emery

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About this Author

Associate

Lisa K. Loesel is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm's Chicago office. 

While in law school, Lisa was the Managing Editor for the Journal of Law Reform.

Lisa is admitted to practice in the State of Illinois.  

312-984-7608
Partner

Todd A. Solomon is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  Todd focuses his practice primarily on designing, amending, and administering pension plans, profit sharing plans, 401(k) plans, employee stock ownership plans, 403(b) plans, and nonqualified deferred compensation arrangements.  He also counsels privately and publicly held corporations and tax-exempt entities regarding fiduciary issues under ERISA, employee benefits issues involved in corporate transactions, executive compensation matters, and the...

312-984-7513
Associate

Brian J. Tiemann is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.   Brian focuses his practice on a variety of employee benefits matters related to pension plans, 401(k) plans, employee stock ownership plans (ESOPs), cafeteria and welfare plans, executive compensation and the implementation of benefit programs for domestic partners of employees.  He is a member of the Firm’s ESOP Affinity Group and has worked with clients to structure and maintain the qualified status of their ESOPs with the Internal...

312-984-3268