Defense of Marriage Act Opinion – Implications to Employers & Potential Actions

The Supreme Court's Decision
On June 26, 2013, the U.S. Supreme Court released its anxiously anticipated opinion in the case of United States v. Windsor which held that the Defense of Marriage Act ("DOMA") impinged on the right of a state to define marriage and violated the right to equal protection as guaranteed by the Fifth Amendment to the U.S. Constitution. DOMA had defined a marriage as only a legal union between one man and one woman as husband and wife, and a spouse as only a person of the opposite sex who is a husband or wife.

DOMA had rejected the long established precept that each state could define "marriage" and the incidents, benefits, and obligations of marriage would be uniform for all married couples within each state. DOMA created a federally mandated difference in consequences based on marital status by rejecting a state's definition of marriage when it applied to same-sex couples. The court pointed out what the state intended to protect, i.e. same-sex marriage, DOMA specifically rejected and used as a classification to impose restrictions and disabilities under federal laws.

The arguments made by proponents of the law were candid that the congressional purpose, as evidenced in the legislative history, was to influence and interfere with states' sovereign choices about who may be married. DOMA's clear purpose was to discourage enactment of state same-sex marriage laws and to restrict the freedom and choice of couples married under those laws if they were enacted.

Because DOMA injured the class that the state law intended to protect and created inequality in Federal law, the Court found that it violated basic due process and equal protection applicable to the Federal government. DOMA impacted over 1,000 separate provisions of Federal law, including tax provisions and social security benefits.

The Court clearly based its decision on the principle that each state may define marriage, and although the Windsor case requires the Federal government to recognize same-sex marriage, it did not require any state to create or recognize same-sex marriage. In fact, the Supreme Court specifically did not address the provision in DOMA that allows states to refuse to recognize same-sex marriages performed under the laws of other states, thus leaving an issue that may be litigated in the future.

Implications of the Decision
Ironically, this state by state definition of marriage preserves disparate treatment under Federal law between same-sex and heterosexual couples because marital status for Federal rights, benefits, protections, and entitlements is dependent on determining marital status under state law and each state may be different.

The problem created by this lack of country-wide uniformity is easily presented by our mobile society. If a couple gets married in a state that recognizes and allows the creation of same-sex marriages, but the couple lives in another state that does not recognize or permit same-sex marriage, do the Federal rights, benefits, protections, etc. accorded married couples apply to that couple? Will the Federal government treat that couple as married because there was a marriage created in a state that creates and recognizes same-sex marriage despite the couple living in a state that does not? This is by no means clear.

This lack of clarity is not just a problem for the same-sex married couple. An employer with employees in multiple state locations, or for that matter, the one location employer which employs an individual who resides in a different state than where the employer is located, may have to look to multiple state laws to administer properly the benefit programs, including resolving employee benefit rights and the tax consequences of those benefits. An employer presented with the same sex married employee has to determine whether, for example, spousal consent is required for the employee to name a non-spouse beneficiary and if the employer is providing health care coverage for the spouse whether the value of the benefit is taxable or excludable from taxation. The Windsor decision clearly complicates benefit administration and income tax reporting.

Another example of the consequences of the Windsor decision concerns rights that a same-sex couple may now have under the Family and Medical Leave Act ("FMLA"). FMLA grants to an employee the right to take time off (assuming certain conditions have been met to create entitlement to that right) to care for a spouse. If the employee and the employer are in a state that does not recognize same-sex marriage, but the employee married in a state that does, will the employer have to recognize that marriage for FMLA? This situation is ripe for confrontation and litigation. Obviously, the employer may avoid potential FMLA penalties, and the dissapointment of the employee asking for the leave, by simply granting the leave, but some employers may be hard pressed to favor that outcome given the economic impact to the employer based on being without the employee.

Lastly, one needs to distinguish "marriage" from "civil unions." A handful of states have created "civil unions." Civil unions create some obligations, benefits, and rights between the same-sex couple in such a union similar to those between individuals who are legally married. However, basically that status only applies within the state in which created; other states and Federal law does not recognize that status as being the equivalent of marriage. The Windsor decision did nothing to resolve or change those consequences.

The preceding examples present the often complex interplay of Federal and state laws, as well as the problems created by overlapping and conflicting state laws which may result in litigation regarding which state law should apply. Those complex areas of law are well beyond the scope of this briefing.

While the Windsor decision may have created some equivalency for same-sex marriage and heterosexual marriage, it ultimately did not make same-sex marriage the same as heterosexual marriage in all cases and it created significant administrative issues for employers.

Employer Actions
We have recommended to clients for some time that the employer review their employee benefits and policies that may affect employees with "domestic partners," i.e., same-sex and unmarried heterosexual couples. Now, after the Windsor decision, the employer may justifiably hope that the Federal government will issue some releases or that Congress will take some action to provide clarity regarding what the government's enforcement policy will be and/or what tax treatment should be with respect to benefits provided to a same-sex partner of an employee residing in a state that does not recognize same-sex marriages. But that guidance or resolution isn't likely to be available in the near term. As a result, the employer is stuck in the middle trying to manage its liability; comply with the law (whatever that might be) and balance its concerns for employees and its compensation and benefits philosophies with its liability and compliance responsibilities.

In light of the Windsor decision, it may now be time for the employer to resolve any unresolved policy issues, or reconsider its policies, that impact employees with same-sex partners. The employer should consider the states in which the employer has operations and whether those states recognize same-sex marriage. An employer operating in only one state that does not recognize same-sex marriages may conclude that it need not change any of its practices that affect a same-sex married employee.

Further, the employer may want to communicate to employees what the Court's decision means and how that impacts the employee's benefits and other policies and practices such as paid time off or leave. For example, in an effort to dispel misunderstanding, the message may address what the Windsor decision does not do: the decision did not hold that same-sex marriages must be recognized in all situations, nor did it require the employer to offer the same benefits or rights to all same-sex married employees as to heterosexual married employees. As noted above, the decision effectively creates or allows for disparate treatment among "married" employees depending on which state law applies. The best communication may include clear statements regarding the employer's benefits and policies that affect "domestic partners," including same-sex partners, and if there are unresolved matters, that the employer is carefully evaluating what it should or must do. These communications would be intended to educate employees that the answers aren't clear – for either the employee or the employer – and that any near-term uncertainty is not a function of the employer being uninformed, oblivious or uncaring.

The following table describes the impact on employee benefits as a consequence of the Windsor decision when there is a same-sex marriage that is recognized under state law.

Same-sex Marriage Impact
Assumes Legally Created and Recognized

Qualified Retirement Plans

  • Spousal consent required to appoint non-spousal beneficiary
  • For DB plans and certain DC plans, spousal consent is required to elect alternative forms of distribution other than standard 50% J&S
  • Required minimum distribution rules applicable to a surviving spouse are different than for a non-spouse beneficiary with respect to commencement timing, duration and impact on rollovers
  • Participant could take hardship distribution from a 401(k) plan, which provides hardship distributions, for expenses related to a spouse, e.g., college expense

Group Term Life Insurance

  • No Federal law restraints on who can be appointed beneficiary. Failure to appoint means the plan's default provisions apply which will typically result in first alternative being "surviving spouse."

Disability Benefits

  • Benefit payments are made only to disabled employees or former employees. A sufficiently incapacitated individual may require a legal guardian. Who can be a guardian and who is given preference for appointment is a function of state law. The "spouse" could be given preference for appointment.

Health Care Benefits

  • The value of coverage for, and any benefits paid to, a spouse are non-taxable
  • Employee contributions for coverage for a "spouse" can be paid pre-tax under a 125 plan
  • Whether coverage is made available for a same-sex couple is a function of employer philosophy, but "spouse" status may create an enforceable right
  • Contributions to, and reimbursements from, a health care spending account are permitted. Tax consequences are as described for health care coverage and benefits and 125 plan.
  • Children of same-sex spouse would be treated as stepchildren of the employee, which will create access to coverage for those stepchildren. This extension of benefits will apply with respect to COBRA rights and the employee's right to cover young adult children to age 26.

Family and Medical Leave Act

  • When FMLA is applicable, FMLA creates a right in an employee to take time off to care for an ailing "spouse."

The benefits and impacts above will likely be different with respect to a same-sex "married" couple who lives in a state that does not allow the creation of or recognize same sex marriage. As noted in the commentary above, determining whether a same-sex marriage is recognized is dependent on, and affected by, complex issues of state law, including a state's laws concerning recognition of the laws and court decisions of other jurisdictions, i.e., states as well as foreign governments.

About State Law

  • U.S. states that allow same-sex marriage, along with the District of Columbia: Connecticut, California, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington.
  • U.S. states that allow civil unions between same-sex couples, but not marriage: Colorado, Hawaii, Illinois, New Jersey and Rhode Island. This number will go down to four this summer after Rhode Island's new marriage laws take effect on August 1. Note - Some states that allow civil unions also ban same-sex marriage.
  • U.S. states that have banned same-sex marriage, either through legislation or constitutional provisions: Alabama, Alaska, Arizona, Arkansas, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Wyoming.


For additional information about the Supreme Court ruling and implications, please contact Scott Hamner, Principal, 419.327.4128, This email address is being protected from spambots. You need JavaScript enabled to view it..