DOMA's Death Raises Questions for HR Executives

The Supreme Court's decision to strike down the Defense of Marriage Act was clear, but in its wake are questions about precisely how employer-sponsored benefits will be affected.

While buildings lit up with rainbows and same-sex couples tied the knot, employers observed last week's Supreme Court ruling on the Defense of Marriage Act by reviewing their employee benefit packages and awaiting more detailed instruction from various federal agencies.

 While expanding rights to 114,100 legally married same-sex couples in 12 states, including the District of Columbia, the undoing of DOMA, also affects more than 1,000 federal laws.  

Employers in states where same-sex marriages are legal are now required to expand employer-sponsored health plans, retirement benefits, pensions, health savings and flexible spending accounts, COBRA coverage, HIPAA enrollment rights, and FMLA leave rights to same-sex marriages. Everything from services, employee discounts, and retirement planning services are expanded to same-sex spouses.  

But there are still a lot of questions around how the Supreme Court ruling will affect the particulars of employer-sponsored benefits in different states, and there's a variety of complexity to how benefits departments will implement the rulings for employees.  

Of the 114,000 same-sex couples who are legally married, 38,000 live in states where their marriages aren't recognized, according to The Williams Institute, a national think tank at UCLA Law on sexual orientation, gender identity law and public policy. Health plan providers, employers, and LGBT employees alike are awaiting further clarity from the IRS and the Treasury Department, as well as from other federal regulatory bodies. 

President Obama, traveling internationally last week, urged federal regulators to act swiftly, and said, "The federal government should broadly interpret its laws to guarantee benefits to the maximum number of same-sex married couples."

Gary Jurney CLU, ChFC, president of Kainos Partners, a benefits and HR consulting agency in Houston, said in an interview last week that he doesn't anticipate much changing for employers in states that don't recognize same-sex marriages, but it's not totally clear whether employers may keep language specifically saying they don't recognize same sex marriages in their plans.

In the national media, lawyers and benefits consultants are advising all employers to reexamine the language of their policies . Employers with facilities across different states will have to look especially closely at their policies, and possibly create separate documentation across different states to reflect the laws of those jurisdictions.  

California is an outlier. Most employers there already offer benefits to the state's 200,000 same-sex couples, according to The Williams Institute. The think tank estimates that in three years, 37,000 same-sex couples in California will marry.

For the 13,000 employees at Scripps Health, a nonprofit health system in San Diego, CA, adult domicile partners have been covered on employer-sponsored health plans since the late 1990s. When California began to allow registered same-sex domestic partners, Scripps Health modified its plan to accommodate registered domestic partners. 

"The only real impact to our system," says Dayna Pearson, director of health plans for Scripps Health in an interview last week, "is the timely shift that needs to take place so that premiums for same-sex marriages will come out before taxes, versus after taxes as it stood two days ago."  

The equal tax treatment of health insurance premiums will be one of the biggest changes for employees. Same-sex couples can now pay for health benefits with pre-tax dollars and those employees receive an employer contribution towards their spouse's coverage without being taxed. Previously only heterosexual couples paid for spouse's benefits from pretax earnings. Same-sex couples working in the private sector pay an average of $10,000 more than heterosexual couples in taxes for employer-sponsored healthcare.  

In states where same-sex marriage is legal, human resource and benefits departments will have to update language in summary plan documents. Pearson says benefits teams should easily be able to accommodate all of the updates into the payroll system and online benefits systems in time for open enrollment.  

"I think healthcare is farther along than some other industries with the gay and lesbian population, so it might take a month to figure out the programming and updating the system to accommodate it," says Pearson. "This isn't a big issue. Maybe it will take a few weeks. Healthcare reform—now that is going to take a lot of time!"