Update: Further information regarding DOMA and a new Ruling can be found here in a more recent article.
On Wednesday, June 26, 2013, the U.S. Supreme Court struck down Section 3 of the Defense of Marriage Act ("DOMA") as unconstitutional. Section 3 of DOMA states: "In determining the meaning of any Act of Congress, or of any ruling, regulation or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage' means only a legal union between one man and one woman as husband and wife, and the word ‘spouse' refers only to a person of the opposite sex who is a husband or a wife." In his opinion for the 5-4 majority in U.S. v. Windsor, Justice Kennedy found that Section 3 reflects animus and serves no legitimate purpose.
While historically monumental to people on either side of the same-sex marriage debate, the decision is both narrow and significant for employers in the twelve states recognizing same-sex marriage. The decision is narrow because it does not declare state prohibitions on same-sex marriage unconstitutional. Instead, the decision provides that the federal government may no longer refuse to recognize same-sex marriages entered into in states where same-sex marriage is legal. It remains to be seen whether that recognition will be limited to same-sex married couples who continue to reside in a marriage equality state, or will be "portable", i.e., extend to same-sex married couples who married in a marriage-equality state but reside in a state that does not recognize same-sex marriage. While these issues will likely be at the heart of future legal challenges, the decision is significant because, as any employer is already aware, an employee's marital status plays an important role in that employee's employment benefits, and many benefits are governed by federal statutes and implicate federal taxation. For employers in states, like Iowa, that recognize same-sex marriage, the defeat of DOMA means it's time to schedule a meeting with your legal counsel to get in compliance with the new regime.
By way of example, consider the following two significant changes to employee benefit programs post-DOMA:
FMLA Leave: The Family Medical and Leave Act (FMLA) mandates that employers with 50 or more employees must provide up to 12 weeks of leave to eligible employees for family and medical reasons. Among these FMLA-recognized reasons for mandated leave is care for a family member with a serious medical condition. FMLA defines family to include a "spouse", child or parent. Under DOMA, "spouse" only referred to a partner of the opposite sex. After Wednesday's Supreme Court decision, employers in same-sex marriage states will be required to permit FMLA leave for the care of same-sex partner.
Employer-Provided Healthcare Benefits: The U.S. Tax Code excludes from the employee's taxable income an employer's contribution to health insurance premiums for that employee's spouse, but treats the employer's contribution to health insurance premiums for a domestic partner as a benefit for which the employee must pay federal income tax. For employers that provide coverage for domestic partners, that taxable income is also reflected in the employer's payroll tax liability. Wednesday's decision should mean an end to the distinction for employers in states recognizing same-sex marriage: an employer's contribution to an employee's same-sex marital spouse's health insurance premiums should be deemed exempt from federal income taxation, with resulting relief for that employer's payroll tax liability.
The Take-Away: Court observers have estimated that over 1,000 federal laws and regulations will be impacted by the demise of DOMA. As the two examples above illustrate, these changes will have significant impacts on the extension and administration of employer-provided benefits. We strongly urge employers to meet with legal counsel promptly to assist in making the required transition.
For more information regarding this recent Supreme Court decision, please contact Adam S. Tarr.