Providing benefits to same-sex spouses of employees: Legal issues, best practices
Nevada and Connecticut are the two latest states to prohibit discrimination based on sexual orientation, adding to a total of 21 states that provide such protections. In those areas, the workplace implications are numerous, with many private employers wondering whether they could be subject to a discrimination claim for not extending benefits to the same-sex partners of their employees, when they provide for opposite-sex spouses.
According to Teresa Renaker of Lewis Feinberg Lee Renaker & Jackson, whose work focuses on such issues, the answer is generally no. Speaking on the ABA-CLE program “Sexual Orientation and Gender Identity in the Workplace: Current Legal Challenges and Best Practices,” she elaborates that the Employee Retirement Income Security Act governs most employee benefits provided by private employers, and the act pre-empts state anti-discrimination statutes.
Enacted in 1974, ERISA covers both employee welfare benefit plans such as those for health care as well as employee retirement benefit plans. ERISA coverage includes all the benefits described in Section 302(c) of the Labor Management Relations Act.
Because the term “spouse” has to be interpreted according to DOMA, an employer’s contribution to the cost of benefits for a non-tax dependent domestic partner is taxable income for the employee, cautions Renaker.
However, there are several employer-provided benefits that ERISA pre-emption does not reach, and those are subject to state law. “These are not your core pension, health and disability benefits,” Renaker explains, sharing examples of time-off policies, bereavement leave and merchandise discounts. “Because these benefits are not governed by ERISA, state law can require that they be provided to same-sex partners [of employees].”
Health plans of state and local governments as well as those of churches are also not subject to ERISA governance.
Also important to note: “Where an ERISA plan is funded by insurance, a state can regulate the plan by regulating the insurance plan that funds it,” warns Renaker.
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Renaker gives the example of California’s Insurance Equality Act. “If an employer chooses to fund its ERISA-governed plan through the purchase of insurance, and it chooses to provide those insured benefits to opposite-sex spouses [of employees], in California, employers have to provide those benefits to same-sex partners as well.”
The Defense of Marriage Act further complicates an employer’s provision of benefits. DOMA governs the interpretation of federal statutes such as ERISA, and where the terms “spouse” and “marriage” appear, employers must define those words as “opposite-sex spouse” and “opposite-sex marriage.”
For instance, the COBRA amendments to ERISA require that group health plans make continuation coverage available to qualified beneficiaries—such as spouses—of employees losing benefits from an employer-sponsored plan. However, “because the term ‘spouse’ has to be interpreted according to section three of DOMA, group health plans are not required to make continuation coverage available to domestic partners [of employees], even if they were covered under the plan when their spouse was an active employee.”
“Plans are not prohibited from providing continuation coverage to domestic partners,” Renaker continues, pointing out that many employers extend COBRA benefits despite DOMA, for reasons both of benefits equality as well as for administrative simplicity.
DOMA also plays a role in how benefits extended to domestic partners are taxed. Because the term “spouse” has to be interpreted according to DOMA, an employer’s contribution to the cost of benefits for a non-tax dependent domestic partner is taxable income for the employee, cautions Renaker.
In order to ameliorate the tax differential, many employers such as Google provide a reimbursement for the tax on the income, she says.
In addition to Renaker, the session included Louis Lopez of the U.S. Department of Justice and Ed Reeves of Stoel Rives, LLP, who acted as moderator. Topics of discussion also included discrimination claims under Title VII of the Civil Rights Act and best practices for employers.
The Section of Labor and Employment Law; The National Lesbian, Gay, Bisexual and Transgender Bar Association; and the ABA Center for CLE sponsored the program.
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