Supreme Court Gay Marriage Ruling Affects Companies' Employee Benefits

Supreme Court Gay Marriage Ruling Affects Companies’ Employee Benefits

The U.S. Supreme Court's recent decision extending same-sex marriage to every state will have a big effect on many employee benefit programs. Prior to the ruling, most states (and the federal government) recognized same-sex marriage. If all of your employees live in states that previously recognized gay marriages, then no significant changes are required. But, if any of your employees live in a previously "non-marriage" state, then the ruling will make a difference. 

If some of your workers live in a "non-marriage" state and you previously offered benefits to same-sex spouses, then for any employees in those states who have a same-sex spouse, you'll need to adjust their state tax withholding to the "married" rate, and you may need to adjust their withholding to reflect the fact that spouse health benefits will no longer be subject to state tax. 

If some of your employees live in "non-marriage" states and you previously did not offer benefits to the same-sex spouses, you now may be required to do so. 

A large number of spouse benefits are mandated by federal law, and for those, you will be required to offer them to same-sex spouses. (And you'll probably be required to offer all spouse benefits to same-sex spouse spouses if you're a government contractor.) It is likely you will need to have the plan documents revised and communicate the changes to employees. 

As for spousal benefits that aren't specifically mandated by federal law, it is not entirely clear, but it is very likely that refusing to offer them to same-sex couples would violate federal or state discrimination laws. It is almost certainly wiser to offer the benefits than to risk a discrimination lawsuit. 

A bigger question is what to do if you have previously been offering benefits to unmarried domestic partners? Many companies have been offering domestic partner benefits to help gay couples who couldn't legally get married, and many have offered them to unmarried opposite-sex couples as well. But now that gay couples can marry in every state, a lot of companies will start rethinking whether they want to continue offering these benefits. 

Domestic partner benefits can be tricky, because – unlike with marriage – there's often no clear way to determine whether someone is in fact a domestic partner, or when a domestic partnership has ended. Domestic partner benefits also create tax complexities, because typical spousal deductions don't apply. Companies that offer such benefits to gay couples but do not offer them to straight couples could be violating discrimination laws. 

Recently, many businesses have been phasing out domestic partner benefits, and the Supreme Court's ruling will likely accelerate this trend. 

In summary, for those companies that were operating largely in a non-marriage state with respect to same-sex marriages, there will be various changes that will have to be implemented to employee benefit programs to reflect the Supreme Court's acknowledgment and recognition of same-sex marriages as legal.