Supreme Court’s DOMA Ruling Will Pose Some Challenges for Employers

June 28, 2013

This week’s ruling by the U.S. Supreme Court in United States v. Windsor striking down aspects of the Defense of Marriage Act will in many ways ease the path for same-sex spousal benefits many large companies are providing, but the decision could add some complications due to the varying state laws on same-sex marriage as well as the potential retroactive application to employer decisions that were based on DOMA.  Each of these poses a new set of separate issues:

  • Post-DOMA Compliance Patchwork.  The decision leaves unanswered which state’s marriage law will control: a couple’s state of residency or the state in which the same-same marriage was performed.  Because only 14 states currently recognize same-sex marriages performed elsewhere, federal agencies may adopt a “state of celebration” rule to ensure consistent implementation nationwide.  Either way, the decision will trigger significant administrative costs associated with the delivery of benefits to thousands of employees nationwide.

  • Potential Retroactive Impact.  The Court in Windsor granted retroactive tax relief to the petitioner. If the IRS retroactively applies the decision to all employee benefit laws, the cost impact could be significant.  Same-sex spouses could request employers to recalculate retirement benefits to provide for spousal coverage. They could also challenge prior distributions from plans that were made without the required spousal consent because of DOMA.  Retroactive implementation of DOMA would also allow same-sex spouses to request retroactive changes to health benefit elections due to a prior same-sex marriage or retroactive spousal COBRA coverage. 
Although the Court’s decision did not dictate who must be covered under employers’ benefit plans, employers will need to closely examine their plan documents, payroll systems, and compliance practices to determine whether amendments are required to the definition of “spouse” or “marriage” in those states that permit or recognize same-sex marriages.  The Association will continue to provide updates as guidance is issued by the relevant governmental agencies.