By Florence Olsen
The U.S. Supreme Court's decision in June on the Defense of Marriage Act changes the rules for how employers administer health and welfare benefits in states that recognize same-sex marriage, and it might even lead to changes that are not legally required, an attorney at the law firm Ballard Spahr said July 11.
The consequences of the high court's decision in United States v. Windsor on health and welfare benefits generally will depend on whether a state recognizes same-sex marriage, said Jonathan M. Calpas, an associate at Ballard Spahr in Philadelphia, who spoke during a webinar sponsored by the law firm.
However, employers that are not legally required to change benefit plans might find themselves considering changes “for employee relations purposes or for administrative simplicity,” Calpas said during a webinar titled The Changing Definition of Marriage: How the Supreme Court's Decision on the Defense of Marriage Act Will Affect Employers and Individuals. Thirteen states and the District of Columbia expressly permit same-sex marriage, he said.
The Supreme Court ruled June 26 that DOMA's Section 3 exclusion of state-sanctioned, same-sex marriages from the federal definition of marriage is unconstitutional (United States v. Windsor, U.S., No. 12-307, 6/26/13, 64 BTM 209, 7/2/13).
In states that recognize same-sex marriage, new rules post-Windsor will apply to special enrollment under the Health Insurance Portability and Accountability Act and to continuation of health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), Calpas said.
Before Windsor, the decision to offer special enrollment under HIPAA to a same-sex spouse was up to the employer, he said. “Post-Windsor, in states that recognize same-sex marriage, employers are required to offer special enrollment to a same-sex spouse who is eligible” for HIPAA coverage, Calpas said.
Under HIPAA special enrollment, individuals who previously declined health insurance coverage may enroll for coverage outside a plan's open-enrollment period.
Individuals treated as qualified beneficiaries have the right under COBRA to continue their health insurance coverage at group rates when they lose that coverage because of a qualifying event, such as termination of employment, reduction in the number of work hours, divorce, or death, Calpas said.
Before Windsor, an employer was not required to offer COBRA to an employee's same-sex spouse or the children of a same-sex spouse enrolled in coverage under the group health plan, Calpas said. “Post-Windsor, in states that recognize same-sex marriage, employers are required to offer an employee's same-sex spouse and her children independent COBRA election rights to continue coverage under the group health plan,” he said.
Health savings accounts allow individuals who are covered by high-deductible health plans and who have no other first-dollar coverage to receive preferential tax treatment on contributions that can be used to pay for medical expenses, Calpas said.
Before the Windsor decision, same-sex spouses were treated as two individuals, which meant that each individual could contribute up to the HSA family maximum if both individuals had coverage under a family-size high deductible health plan, Calpas said.
After the decision in Windsor, in states that recognize same-sex marriage, same-sex spouses are treated as spouses for federal tax purposes, Calpas said. “Individuals in a same-sex marriage must now share the HSA family contribution limit, which is $6,450 for 2013,” he said.
A dependent care assistance program allows employees to reduce their taxable income by setting aside money from each paycheck on a before-tax basis to pay for dependent care expenses, Calpas said. Before the Windsor decision, an employee could use a dependent care assistance program to pay a caregiver who is the employee's same-sex spouse, “which is something that an employee with an opposite-sex spouse could not do,” he said.
On the other hand, an employee with a same-sex spouse could not use a dependent care assistance program to reimburse expenses associated with the care of the same-sex spouse's child, which an employee with an opposite-sex spouse could do, Calpas said.
“Post-Windsor, in states that recognize same-sex marriage, an employee will not be able to pay a caregiver who is the employee's same-sex spouse. However, an employee with a same-sex spouse will be able to use a dependent care assistance program to reimburse expenses associated with the care of a same-sex spouse's child,” he said.
One of the few health and welfare benefit rules that did not change with Windsor relates to changing benefit elections under cafeteria plans, Calpas said.
“Before Windsor, the decision to offer election changes pursuant to a change in status was at the option of the employer, whether a married employee was in an opposite-sex marriage or a same-sex marriage,” he said. Post-Windsor, any election change pursuant to a change in status is still at the employer's discretion, Calpas said.