Friday, June 3, 2011

What Changes for Health Plans When Defense of the Law Defining Marriage Is Curtailed?

Tweet

The Obama administration has taken the position that §3 of the Defense of Marriage Act (DOMA), 1 USC §7, is unconstitutional as applied to legally married same-sex couples, so the Department of Justice is scaling back its defense of the law. Executive agencies will continue complying with the law, however, the U.S. Attorney General stated in a letter to the Speaker of the House.

Section 3 defines "marriage" and "spouse" to exclude same-sex couples for purposes of federal legislation and administrative agency interpretations, including tax treatment. According to the U.S. Attorney General, classifications based on sexual orientation should be subject to a heightened standard of scrutiny and the law does not meet that standard. Thus, the Department of Justice will no longer argue the rational basis defense for constitutional challenges to the law.

Does the White House's declaration break new ground for employers who treat or seek to treat their legally-married same-sex couples the same as spouses of the opposite sex? Not really. Not yet, anyway. The IRS and other agencies were instructed to act in accordance with DOMA unless and until Congress repeals it or the judicial branch renders a definitive verdict against its constitutionality. The Speaker of the House, John Boehner (R-Ohio), responded with plans to initiate action in the House of Representatives to defend DOMA.

Employers in states that recognize same-sex marriage still must withhold on income imputed for plan benefits for a same-sex spouse. States maintaining a tax-qualified state long-term care plan still jeopardize the plan’s tax-favored status by allowing legally married same-sex couples to participate. According to the letter, the IRS will challenge failures to comply. However, what happens once the taxpayer asserts the unconstitutionality of DOMA §3? If settlement is an option, will it be more readily pursued in the interest of judicial economy? Will the parties opt for litigation in the hope of attaining a definitive verdict? Will further legislation resolve the issue?

Will you be more likely to challenge DOMA’s application to your health plan?

-Nadia Masri, Tax Law Editor (Compensation Planning)

All BNA publications are subscription-based and require an account. If you are a subscriber to the BNA publication and signed-in, you will automatically have access to the story. If you are not a subscriber, you will need to sign-up for a trial subscription.