COMMENTARY: Same-sex marriage decision may impact employee benefit plans

By Elizabeth H. Latchana

On Friday, June 26, 2015, the U.S. Supreme Court issued the 5-4 landmark decision in Obergefell v Hodges striking down same-sex marriage bans across the country as unconstitutional under the Fourteenth Amendment. Now, Michigan, as well as every other state in the country, must legally allow and recognize same-sex marriages.

Beyond the decision’s social and political implications, employers must carefully consider how the decision impacts other legal matters. With regard to health and welfare benefit plans, the answer likely depends on a number of factors, including whether the employer is a governmental or non-governmental entity, whether the plan is insured or self-funded, and how the plan documents currently define spouse.

State and Local Governments & Contractors
The U.S. Supreme Court’s decision was based on a violation of the Fourteenth Amendment, which applies to state and local governments. Therefore, governmental employers appear to be directly bound by Obergefell and must provide benefits to legal spouses on an equal basis, regardless of sexual orientation. Moreover, employers that are governmental contractors may be bound by contracts with the governmental agencies to follow the same rules and anti-discrimination provisions.

Private Employers
Non-governmental employers may not be directly impacted by Obergefell; however, if the benefits offered are insured, coverage must be provided according to state insurance laws, which also may be changing pursuant to Obergefell. Moreover, whether offering insured plans or self-funded arrangements, employers must be mindful of nondiscrimination laws under Title VII of the Civil Rights Act of 1964, as well as state discrimination laws, such as Michigan’s Elliott-Larsen Civil Rights Act. While neither of these laws directly prohibits discrimination based on sexual orientation, they do prohibit sex discrimination. The Equal Employment Opportunity Commission (EEOC) has taken the position that sex discrimination extends to sexual orientation. If courts adopt the EEOC’s position, then employers subject to Title VII (generally employers with 15 or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year) will be precluded from offering benefits only to opposite-sex spouses.

Plan Documents and Policies
Employers should carefully review their health and welfare plan documentation, as well as all relevant employer handbooks and policies, to determine how Obergefell affects their current benefit arrangements and whether modifications are required to comply. If an employer’s plan defined “spouse” pursuant to federal law, that definition already encompassed same-sex spouses due to the Windsor decision of 2013. If, however, the term “spouse” was defined pursuant to Michigan law, or another state law that had not recognized same-sex spouses, that term (and that benefit arrangement) now automatically encompasses same-sex spouses. If “spouse” was defined specifically as opposite-sex spouses, an employer must consider whether it will change its definition and if not, must consider the litigation risks and consequences it may face.

Outstanding Issues and Considerations
Some issues that remain are whether, and to what extent, Obergefell will have retroactive effect for both taxation and benefit eligibility purposes. Moreover, if an employer previously offered domestic partner coverage, will that coverage remain? Or will the employer now require legal marriage (whether same-sex or opposite-sex) for benefit eligibility…

The law does not require health and welfare benefits to be provided to spouses. However, if spousal coverage is offered, employers must review their health and welfare plan documents, as well as their policies and handbooks with respect to all fringe benefits, to determine how the Obergefell decision affects their employee benefit programs and whether any changes are required for compliance.
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This article serves as a general summary of the Obergefell decision and is not legal advice. Fraser Trebilcock will continue to monitor changes to the regulatory environment to assist you with your health care reform compliance strategies. If you have questions, or for more information, contact attorney Elizabeth H. Latchana at elatchana@fraserlawfirm.com or 517-377-0826. Latchana specializes in employee health and welfare benefits. Recently recognized for her outstanding legal work, she was selected as the 2015 “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers®.