The United States Supreme Court (Court) has held that benefits offered under federal law to opposite-sex spouses must also be offered to same-sex spouses. The Court’s decision in United States v. Windsor (Windsor) may have a major impact on employers including self-insured employers in some, but not all states.
The law applies to “lawful” same-sex marriages in states that recognize same-sex marriages as legal. Presently 13 states (California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington) and the District of Columbia have enacted laws legalizing same-sex marriages.
The Court’s decision does not invalidate the bans on same-sex marriages that presently exist in 35 of the remaining 37 states. Additionally, it does not specifically impact benefits provided by employers to individuals involved in samesex domestic partnerships.
Due to the increasing variance in state laws, employers that operate in multiple states will need to determine the best way to administer their plans in multiple jurisdictions.
Under Federal law employers are not generally required to provide health insurance to an employee’s spouse. Those employers providing such coverage may want to review how their plans define “spouse” and ensure the definition of the term is clear. Those employers covering opposite-sex spouses but not samesex spouses may also want to examine non-discrimination laws to ensure their plans are compliant.
Windsor will also have tax consequences for both employers and employees. Based on one analysis,the value of same-sex spousal coverage will now generally not be taxable at the federal level. Prior to the decision it was generally taxable. This analysis also points out that tax implications at the state level do not always follow the federal treatment.
According to the analysis, before Windsor health benefits provided to the children of spouses in same-sex couples were generally taxable unless those children were also the employee’s dependents for tax purposes. Post Windsor, there appears to be some question regarding tax treatment of such children.
Additionally, the analysis found that it is unclear whether employers and/or employees will now be entitled to refunds of some or all of employment taxes paid on the value of health benefits provided to a same-sex spouse or children of the employee’s same-sex spouse.
The Court’s decision may also impact non-taxable reimbursements allowable under HAS, FSA and HRA for same-sex spouses.
H.H.C. Group will continue to monitor and report the impact of the same-sex marriage decision and other Court actions on the selfinsurance industry.
(H.H.C. Group, eNewsletter, Vol. 15, Issue 7, July 2013)