Marriage Equality Decision Is Big News (But May Have Little Impact on Private Sector Employee Benefit Plans)
The Supreme Court’s decision last week in Obergefell v. Hodges is big news: it held that the 14th Amendment requires states to license same-sex marriages and to recognize lawful out-of-state same-sex marriages, and thus legalized same-sex marriage throughout the country. In a final section that begins with a philosopher’s take — “No union is more profound than marriage…” — and ends with a jurist’s — “It is so ordered.” — the Court captured the attention of SCOTUS junkies and the rest of the country alike, leading to an outpouring of celebrations, headlines, social commentary and musing about the future.
Obergefell clearly is of cultural importance and has personal significance for many people, but what does it mean for private sector employers and their employee benefit plans? Surprisingly little. Private sector employee benefits are governed primarily by federal law, which had its watershed moment on this issue in 2013 when the Supreme Court required the federal government to recognize same-sex marriage in United States v. Windsor.
Following the Windsor decision, the IRS and the Department of Labor both adopted the “place of celebration” rule, which provides that a marriage includes any same-sex marriage validly entered into in a state or foreign jurisdiction that recognizes same-sex marriage, even if the individuals reside in a state that does not recognize same-sex marriage. As a result, private employer plans subject to federal law have been required to recognize same-sex spouses regardless of where the plan or the participants are located and the benefits afforded spouses under these private plans have been available to all same-sex couples who were able to marry in a state that allowed same-sex marriage.
Our own Robert Newman discussed these issues with USA Today in a recent article, noting that private sector employee benefit plans will not be greatly affected by the new decision, but that “Employee benefit plans of state and local governments in states that did not previously recognize same-sex marriage could feel a much greater impact.” Mr. Newman went on to point out that, even before Windsor and changes at the state level, “Many companies, particularly large corporations, instituted programs extending benefits to same-sex couples well before same-sex marriage became legal in many states.”
Windsor raised a number of other questions for private sector employee benefit plans, and some of these remain open following Obergefell. In particular it is unclear under the IRS’s guidance whether a participant or beneficiary could successfully claim benefits retroactively based on Windsor. A recent lawsuit against FedEx Corporation has posed this question in federal court. Another question that has gained additional attention following Obergefell is whether employers are likely to eliminate domestic partner benefits, now that same-sex marriage is recognized throughout the country. It remains to be seen how these issues will play out post-Obergefell.