Attorneys: Same-Sex Marriage Ruling Will Simplify Plan Administration, Raise Questions


The U.S. Supreme Court's decision legalizing same-sex marriage nationwide will help those running employee benefit plans by simplifying plan administration, an attorney told Bloomberg BNA.

The historic 5-4 decision by the high court on June 26 establishes a national right to same-sex marriage and requires states to recognize same-sex marriages performed in other states (Obergefell v. Hodges, 2015 BL 204553, U.S., No. 14-556, 6/26/15).

Teresa Renaker, a founding partner with Renaker Hasselman LLP in San Francisco, told Bloomberg BNA the day of the ruling that the Obergefell decision was likely to provide welcome simplification for sponsors of Employee Retirement Income Security Act-governed plans, particularly with respect to tax issues.

“In states that did not recognize same-sex marriage, welfare plan benefits for same-sex spouses could be taxed differently at the federal and state levels, creating complexities for both administrators and participants,” Renaker said. “This decision will eliminate that differential tax treatment.”

Todd A. Solomon, a partner with   McDermott Will & Emery in Chicago, agreed that Obergefell simplifies tax considerations, calling this “a big relief for employees as well as large employers operating in multiple states as it really eases administration.”

Renaker said the decision will also eliminate the need for plan administrators to consider the “place of celebration” rule in determining the validity of a marriage, which asks whether a given marriage was legal in the state where it was performed.

“Same-sex marriages will be valid wherever performed,” she said.

Few Major Changes

Sam Schwartz-Fenwick, an associate in Seyfarth Shaw LLP‘s Chicago office, said that the court's decision legalizing same-sex marriage wasn't likely to create major changes for tax-qualified retirement plans, because those questions were resolved two years ago in United States v. Windsor, 570 U.S. 12, (U.S. 2013).

According to Department of Labor and Internal Revenue Service guidance issued following Windsor, tax-qualified retirement plans must extend the same benefits to same-sex spouses as are extended to those in opposite-sex marriages.

With respect to welfare benefits that aren't governed by the federal tax code, Schwartz-Fenwick said that Obergefell did little to address this issue, because the case was narrowly focused on the question of marriage.

“The court didn't say that no rational basis existed for discriminating against gay individuals,” Schwartz-Fenwick said.  “It also didn't say that it was sex discrimination to treat same-sex and opposite-sex individuals differently. It was very limited to the question of marriage, so I think it really remains an open legal question as to whether a plan sponsor can continue to restrict coverage to opposite-sex spouses. I don't think anything in this decision changed the law on that issue, so I think it's going to be for another day.”

Also speaking to that point, Solomon drew a distinction between fully-insured medical plans—which he said likely would now be required to cover same-sex spouses—and self-insured medical plans, which might have more freedom to deny coverage.

“Self-insured medical plans arguably can continue to exclude same-sex spouses from coverage, but if they do so they are at risk of facing challenges under federal discrimination law,” Solomon said.  “The EEOC has taken the position that sexual orientation discrimination can constitute sex discrimination under Title VII, so employers that continue to exclude same-sex spouses need to be mindful of the legal risk.”

Excerpted from a story that ran in Pension & Benefits Daily (07/26/2015).

Stay on top of the latest industry trends and news coverage with a free trial to the Benefits Practice Resource Center.