By: Peter E. Hansen, Esq.
Many private employers are understandably unsure of whether to provide benefits to employees' same-sex partners. Presently, federal law neither requires nor prohibits private employers from providing such benefits - although the Department of Labor recently found that approximately one out of every three employers elect to provide benefits to same-sex partners of employees.[1]
Whether a state law affects a benefit plan depends on the Employee Retirement Income Security Act of 1974 (ERISA), but states generally cannot directly mandate ERISA-governed benefits, such as benefits for same-sex couples. Although the Internal Revenue Service currently does not recognize same-sex couples, legislation regarding same-sex partners may affect their eligibility for individual retirement accounts, private pensions and health-care benefits.[2] Adding to this uncertainty, the Department of Justice announced that it will no longer defend the exclusion of same-sex couples from the definition of "marriage" for purposes of federal programs and tax treatment.[3]
Self-funded ERISA plans, including most 401(k) plans, are generally beyond the reach of state law requirements to provide benefits to same-sex partners.[4] Some states indirectly regulate ERISA plans through the terms of insurance policies; for example, the California Insurance Equality Act requires any insured private employer healthcare benefit plans to provide the same benefits to registered domestic partners as it does to spouses.[5] Of course, private employers may amend their retirement plans to provide equivalent benefits to same-sex partners of employees, but same-sex partners are still considered "non-spouse" beneficiaries for 401(k) and individual retirement account distributions and thus must comply with special tax rules and restrictions.[6]
There has been a number of recently proposed federal rules relating to benefits for same-sex partners, and hopefully these rules will soon provide guidance to the growing number of private employers unclear how to comply with current benefits law. Until then, however, employers located in any state with laws that could affect same-sex partner benefits[7] should review their benefit plans to ensure that they are in compliance with applicable state and federal laws.
Questions? Please contact WS Attorney Peter E. Hansen at (262) 560-9696, or email pehansen@wesselssherman.com.
[1] U.S. Department of Labor Bureau of Labor Statistics, USDL-11-1112, Employee Benefits in the United States - March 2011 (2011).
[2] John J. Topoleski, Cong. Research Serv., RS21897, The Effect of State-Legalized Same-Sex Marriage on Social Security Benefits, Pensions, and Individual Retirement Accounts (IRAs) (2011).
[3] Attorney General Eric H. Holder, Jr., Letter from the Attorney General to Congress on Litigation Involving the Defense of Marriage Act (Feb. 23, 2011), http://www.justice.gov/opa/pr/2011/February/11-ag-223.html
[4] ERISA § 514(b)(2)(A), 29 U.S.C. §1144(b)(2)(A).
[5] Cal. Health & Safety Code §1374.58(a); Cal. Ins. Code §§381.5(a), 10121.7(a) (2005).
[6] Susan R. Heylman, Equal Benefits Gain Ground, 56 HR Magazine, no. 6, 06/01/2011.
[7] Arizona, California, Colorado, Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Vermont and Washington.
