The below is from our friends at the law firm of Kutak and Rock:
Impact on Employee Benefit Plans. If an employee benefit plan uses terms such as “marriage” and “spouse,” the plan must interpret these terms according to state law and on a state-by-state basis. In states where same-sex marriage is legal, this means that an employee’s same-sex spouse should be considered a spouse for purposes of the employer’s plan. ...
On a going-forward basis, if a California employee has a same-sex marriage that is recognized in California, then for employee benefit purposes, the employer must treat the same-sex spouse in the same way it would treat an employee’s opposite-sex spouse.
Selected Employee Benefits Laws Implicating “Spouses”
At the present time, same-sex marriages are legal in the following states: California, Connecticut, Delaware, District of Columbia, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington. With respect to employees working and residing in those states, employers will generally be required to give same-sex spouses all of the same benefit-related rights that are given to opposite-sex spouses. (How an employer should treat an employee who works in one state and resides in another will depend on details that are beyond the scope of this Client Alert.) We have highlighted some of the more significant of these rights and opportunities below.
Qualified Retirement Plans
- In certain plans, the participant’s spouse must be eligible for a Qualified Joint and Survivor Annuity and/or a Qualified Preretirement Survivor Annuity.
- In certain plans, the spouse is the default beneficiary for the participant’s account.
- In a 401(k) plan that allows hardship withdrawals, such a withdrawal generally may be based on the medical or educational needs of a participant’s spouse.
- In some cases, a surviving spouse is entitled to defer minimum required distributions following the participant’s death.
- A qualified domestic relations order may award a portion of a participant’s retirement benefit to a former spouse.
Health and Welfare Plans
- Spouses (and their children) may be eligible to enroll (for example, in a health plan) or receive a benefit (for example, a death benefit from a life insurance plan).
- If a plan is subject to COBRA, continuation must be offered to employees, spouses, and the spouse’s children who are qualified beneficiaries.
- HIPAA special enrollment rights must be available to an employee’s spouse and the spouse’s children.
- Medical expenses incurred by a spouse or a spouse’s child may be reimbursed by health reimbursement accounts or health flexible spending accounts.
- An employee may change elections under a cafeteria plan depending on various events experienced by the employee’s spouse and children.
- An employee may be entitled to FMLA leave if the spouse has a serious medical condition.
Action Items
In states where same-sex marriage is legal, employers will generally be required to treat same-sex spouses no differently than opposite-sex spouses on a going-forward basis.
Qualified Retirement Plans
- Inventory. Identify all plan provisions involving “marriage,” “spouse,” and similar terms.
- Employer Determinations. Identify any determinations relating to marital status that are made by the employer under these provisions, and determine whether adjustments are required to recognize same-sex marriages and spouses.
- Vendors. Contact defined contribution plan vendors and request information about how and when they intend to update their processes and procedures related to participant distributions and reporting (e.g., hardship distributions, death distributions, and qualified domestic relations orders). Contact pension plan vendors to discuss benefit calculations which take into account marital status (e.g., survivor annuities) and the process for sending updated statements.
- Documentation. Determine whether the language in the plan documents and summary plan descriptions should be amended to address same-sex marriage and same-sex spouses. Amend the documents as needed.
Health and Welfare Plans
- Inventory. Review all benefit arrangements to determine the instances in which spouses and their children are eligible to enroll or are eligible to receive a benefit. Prioritize those benefit arrangements that require spousal enrollment, such as health coverage or optional life insurance.
- Employer Determinations. Identify any determinations relating to marital status that are made by the employer under these provisions, and determine whether adjustments are required to recognize same-sex marriages and spouses.
- Enrollment. If same-sex spouses were not previously offered benefits on the same basis as opposite-sex spouses, formulate a plan for offering enrollment to these same-sex spouses. Some employers may want to hold a mini-open enrollment, while others may offer enrollment upon request. At a minimum, an employee who currently has a same-sex spouse should be treated as having acquired a new dependent—the employee should be permitted special enrollment rights in any applicable group health plan with regard to the spouse and, where applicable, the spouse’s children.
- Imputed Income. Coverage for same-sex spouses and their dependents will no longer result in imputed income and will require changes for payroll and accounting....
