The Marriage Equality Act (the “Act”), which became effective in New York on July 24, 2011, is intended to provide same-sex married couples with the same access to protections, responsibilities, rights, obligations, and benefits of civil marriage as their opposite-sex counterparts. Among the “benefits” impacted by the Act’s broadly drafted requirements are certain employee benefits, such as those provided by employers under health and welfare plans. With regard to insured
health and welfare benefits (as provided under an insurance policy governed by New York State law), New York had previously addressed the extension of benefits to same-sex spouses who had validly married in another jurisdiction. With passage of the Act, same-sex spouses married in New York now must also be extended the same benefits as opposite-sex married couples. With respect to self-insured
health and welfare benefits, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) generally preempts state law and, thus, the terms of the plan itself, not New York State law, will govern whether an employer must offer benefits to same-sex spouses.
In contrast, pension benefits are governed only by federal laws - ERISA and the Internal Revenue Code of 1986, as amended – which continue to recognize the Defense of Marriage Act (or “DOMA”) and the “one man, one woman” concept of marriage. Accordingly, the Act does not impact pension benefits. The definition of marriage under DOMA continues to keep certain federally-mandated pension requirements, such as qualified pre-retirement survivor annuities and qualified joint and survivor annuities, beyond the reach of same-sex spouses. While a plan sponsor may design a pension plan to provide similar types of benefits for same-sex spouses, the current law does not require them to do so.
Additionally, employers and employees alike should be mindful of the benefits-related tax implications for plans that do provide health and welfare benefits to same-sex spouses. For federal tax purposes, such benefits will continue to be taxable to the employee (unless the same-sex spouse otherwise qualifies as a federal tax dependant) because of the DOMA definition of marriage. Same-sex spouses will not be able to purchase coverage under a cafeteria plan with pre-tax dollars, nor will they be permitted to obtain reimbursement for a same-sex spouse’s medical expenses from a flexible spending account. It is our understanding that the New York State Department of Finance and Taxation will issue guidance concerning the effect of the Act on state tax law. Check back to the employerslawblog in the future for updates.