United States: What Marriage Equality Means For Your Employee Benefits

A frequent headline in the news as of late has been "Federal Judge in State X finds same-sex marriage ban unconstitutional" and then shortly thereafter "Hundreds of couples marry in State X" complete with a picture of a same-sex couple who have been together for decades overjoyed at the prospect of legal recognition for their union, which just a decade ago would have seemed impossible. Conservative Utah Senator Orrin Hatch was recently quoted as saying "Let's face it, anybody who does not believe that gay marriage is going to be the law of the land just hasn't been observing what's going on...anybody who doesn't admit that just isn't living in the real world." Senator Hatch may be right – but what impact does this trend in marriage equality have on private employers and the benefits they provide to their employees? The answer may surprise you...

As of the time of this blog post, 19 states (CA, CT, DE, HI, IA, IL, ME, MD, MA, MN, NH, NJ, NM, NY, OR, PA, RI, VT, and WA – plus Washington, D.C.) have established marriage equality, and an additional 12 states' judges have either struck down state marriage bans as unconstitutional or required their states to recognize same-sex marriages issued by other states (AR, ID, MI, OK, TX, UT, VA and WI judges have struck down marriage bans, and in IN, KY, OH, and TN, judges have issued more limited pro-marriage rulings.) Marriage equality has even made its way into the virtual world – the blockbuster Elder Scrolls game Skyrim has allowed players to choose a spouse of the same sex since launch, and marriage quality is expected in the upcoming 14th installment of the Final Fantasy series. See here for an up-to-date rundown of where things currently stand for marriage equality, brought to you by "Freedom to Marry", an advocacy group working (amongst many others) to establish marriage equality nationwide.

With 44% of the population now living in a state granting same-sex marriages and this issue likely to be headed to the Supreme Court in the upcoming two terms, you may be wondering what this means for your employee benefits – either the benefits you offer to your employees, or the benefits you receive as an employee. Can employee benefits be denied to a legally married same-sex couple by a private employer? As it turns out, yes – in some circumstances an employer can discriminate against legally married same-sex couples and deny the non-employee spouse access to employee benefits.

As an openly gay attorney practicing law in the first state to establish marriage equality, I admit up front that I am extremely biased on this topic. To that end, I would be remiss if I did not point out that private employers are always free not to discriminate and instead choose to offer employee benefits to same-sex couples regardless of the status of marriage equality in their states, since state constitutional bans on same-sex marriage recognition do not apply in the context of private employment. Offering benefits to same-sex couples on par with their opposite-sex counterparts and supporting marriage equality initiatives is good for business. Many tech companies, including Google, Apple, Facebook, Amazon.com and Microsoft have recognized that marriage equality, including equal benefits, translates into "strengthened employee relations, recruiting and overall business success." But for those who are not yet on the marriage equality bandwagon, the law does, for the moment, allow discrimination against legally married same-sex couples in some instances.

Insurance offered by employers comes in two varieties. First, there are fully insured plans, where the employer pays a premium to a third party insurance company every month, and that insurance company then provides coverage for employees – including paying claims. Second, there are self-insured plans, where the employer has hired an administrator (typically also an insurance company) to manage the plan, but the employer itself provides the coverage for employees and pays claims. It often isn't clear to employees which type of plan their employer is offering, since in both cases employees usually receive benefit cards from third party insurance companies. But while the distinction isn't clear to employees, it is very clear to the law – and it makes all the difference for whether employers are allowed to discriminate against legally married same-sex couples.

Fully insured plans are governed by state insurance regulation of the state where the owner of the plan is located (typically the state of the home office of the employer.) If the owner of the plan is in a state that recognizes same-sex marriages, the plan must cover same-sex couples just as it covers opposite-sex couples. If the owner of the plan is located in a state that doesn't recognize same-sex marriages, that state's insurance regulations typically do not require the employer to offer same-sex benefits. As more states begin recognizing marriage equality, and if the Supreme Court ultimately establishes it nationwide as many believe that it will in the coming years, employers with fully insured plans will be required to offer same-sex couples benefits on par with their opposite-sex counterparts.

Self-insured plans are governed by the Employee Retirement Income Security Act of 1974, called ERISA, which is thought to trump state insurance regulation for such self-insured plans. Since these self-insured plans are governed by federal law, including the Title VII of the Civil Rights Act of 1964 which does not currently recognize sexual orientation as a protected class, employers offering self-insured plans have asserted the argument that there is no federal law preventing them from discriminating against their same-sex employees. Until the passage of the Employment Non-Discrimination Act (ENDA), which would likely establish federal protections for same-sex couples, or the courts establishment of sexual orientation as a protected class, employers that offer self-insured plans who choose to discriminate will likely continue to assert this legal argument and continue to discriminate. For more information on the distinction between self-insured and fully-insured plans, as well as information on public sector employers and the tax implications of same-sex benefits, see this publication from the Gay & Lesbian Advocates and Defenders (GLAD).

Marriage equality and its impact on the laws applicable to businesses is a fast-moving area of the law. Before making any decisions on employee benefits, particularly as related to same-sex couples, it is important to consult with an attorney who is well versed in this field and current on recent court decisions relating to marriage equality issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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