ERISA Lawyers Mull Same-Sex Marriage Case; Plan Sponsors Hoping for Uniformity, Clarity

As the U.S. Supreme Court mulls the divisive issue of same-sex marriage, at least one group may be hoping only for a decision that reduces administrative red tape: employers that provide benefits to employees across multiple states.

According to Marcia S. Wagner of the Wagner Law Group in Boston, large multistate employers “favor a uniformity rule when it comes to interpreting retirement plans."

These employers are wondering how to fulfill their obligations related to benefit elections, consents and notices if the rules change every time a same-sex couple moves to a state with different marriage recognition rules, Wagner told Bloomberg BNA on April 28.

The Supreme Court heard oral arguments on two issues related to same-sex marriage on April 28: whether states must allow same-sex couples to marry, and whether states must recognize same-sex marriages validly performed in other states (Obergefell v. Hodges, U.S., No. 14-556, argued 4/28/15).

The court is expected to issue a decision before the end of its term in late June.

Employers Want Uniformity

If the court's ultimate decision allows states to continue banning same-sex marriage, this could make life more complicated for sponsors of employee benefit plans, Sam Schwartz-Fenwick, an associate in Seyfarth Shaw LLP‘s Chicago office, told Bloomberg BNA on April 29.

Such a ruling could create particularly tricky issues in states where legislative bans on same-sex marriage were subsequently overturned by state courts, Schwartz-Fenwick said.

Couples married while same-sex marriage was legal in those states would remain married, he said, but determining state tax treatment would “create headaches and complications."

In that case, “we might need more regulations on what the road ahead looks like,” he said.

Margo Hasselman, a founding partner with Renaker Hasselman LLP in San Francisco, agreed that nearly every employer without an ideological opposition to same-sex marriage would likely “breathe a sigh of relief” if the court's ruling legalized same-sex marriage in all 50 states, because that ruling would cause benefits administration to “simplify enormously.”

Echoing this sentiment, Todd A. Solomon, a partner with McDermott Will & Emery in Chicago, said that large employers are “absolutely” hoping that the court's decision on same-sex marriage creates uniformity surrounding the treatment of same-sex couples.

“Employers are hoping for clarity from a plan administration standpoint,” Solomon told Bloomberg BNA on April 29.

Solomon pointed out that even employers with policies covering same-sex partners must still grapple with state-by-state differences in how such couples are taxed.

“There's still a huge difference in the taxation,” Solomon said. “The state taxation issues are incredibly burdensome."

While many large employers desire uniformity for these very reasons, Wagner said that this desire may be tempered if later regulatory mandates expand the scope and cost of coverage, as the Department of Labor has done with respect to job leave benefits under the Family and Medical Leave Act.

Regulations? Probably Not

Both Solomon and Schwartz-Fenwick said the court's ultimate ruling on same-sex marriage isn't likely to spur any further regulatory guidance related to employee benefit plans.

Solomon said that most of the benefits-related federal issues surrounding same-sex marriage were resolved through guidance issued by the Department of Labor and the Internal Revenue Service in the wake of the Supreme Court's decision in United States v. Windsor, 570 U.S. 12. Notably, Windsor invalidated key provisions of the federal Defense of Marriage Act.

“The only thing that really remains are state issues,” Solomon said.

Schwartz-Fenwick agreed, saying that any additional regulatory guidance on this topic “would have happened already.”

He added that a Supreme Court decision striking down state law marriage bans wouldn't change much at the federal level, making further regulatory guidance arguably unnecessary.

Excerpted from a story that ran in Pension & Benefits Daily (04/29/2015)

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