Employee Benefits FAQs on Same-Sex Marriage
1. Which states recognize same-sex marriage?
A growing number of U.S. jurisdictions are recognizing same-sex marriage. They include: California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Rhode Island, Vermont, Washington (state), and Washington D.C.
2. Does Federal law recognize same-sex marriages?
Prior to June of 2013, Federal law did not recognize same-sex marriages. In fact, section 3 of the Defense of Marriage Act (“DOMA”) defined “marriage,” for federal purposes, as strictly between one man and one woman. However, the United States Supreme Court declared Section 3 of DOMA unconstitutional in the landmark case United States v. Windsor in June of 2013. The Court found that DOMA attempted to override state law by including a federal definition of marriage and that it violated the Fifth Amendment’s due process clause by treating legally married same-sex couples differently than legally married opposite-sex couples. The Court emphasized the power of the states, not the federal government, to decide whether to allow same-sex marriages. Post Windsor, there is no federal definition of marriage; the federal government instead defers to individual state definitions. In other words, Federal law will recognize a same-sex marriage so long as the couple was lawfully married in a state recognizing same-sex marriage under that state’s laws.
3. How does the Windsor decision affect payment of federal taxes?
The IRS published Revenue Ruling 2013-17 to address how it would enforce the Windsor ruling for federal tax purposes. The IRS stated that “ gender-neutral terms in the [Internal Revenue] Code that refer to marital status, such as ‘spouse’ and ‘marriage’, include, respectively, (1) an individual married to a person of the same-sex if the individuals are lawfully married under state law and (2) such a marriage between individuals of the same-sex.” The IRS further stated that for federal tax purposes, the status of a same-sex marriage is based on the laws of the state where the marriage was initially established or celebrated. Therefore, the IRS, for federal tax purposes, recognizes a same-sex marriage under the state of celebration rule: if a same-sex couple was wed in a state that legally recognizes same-sex marriage, that couple is considered married for federal tax purposes.
In a series of frequently asked questions, the IRS addressed what they interpreted “lawfully married under state law” to mean. The IRS explained that for federal tax purposes, a same-sex couple “lawfully married under state law” means that the same-sex couple was wed in a state that’s domestic laws “authorize the marriage of two individuals of the same sex even if the married couple resides in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriage.” To put it plainly, the IRS follows the “state of celebration” rule, where a same-sex couple is recognized as long as they were initially married lawfully in a state that recognizes same-sex marriages. Similarly, the Department of Labor (“DOL”) issued Technical Release 2013-04, in which it addressed how Windsor affected the meaning of “marriage” and “spouse” under the Employee Retirement Income Security Act of 1974 (“ERISA”). Like the IRS, the DOL adopted the “state of celebration” rule. The DOL concludes that “A rule that recognizes marriages that are valid in the states in which they were celebrated, regardless of the married couple’s state of domicile, provides a uniform rule of recognition…”
4. Does Windsor impact employee benefit plans?
Yes. The IRS recently issued a set of Frequently Asked Questions (“FAQs”) that explains how qualified retirement plans are affected by Windsor and subsequent IRS Revenue Ruling 2013-17. The FAQs provide that for purposes of satisfying federal tax laws relating to qualified retirement plans, a qualified retirement plan must treat a same-sex spouse as a spouse and must recognize any same-sex marriage lawfully entered into under any state law. However, these rules only apply to lawfully married couples and are inapplicable to individuals in domestic partnerships or civil unions. The FAQs further provide that the IRS intends to issue additional guidance for qualified retirement plans on compliance with Windsor and IRS Revenue Ruling 2013-17.
The DOL recently issued similar guidance to employee benefit plans on the definition of “spouse” and “marriage” under ERISA. The guidance provided that the term spouse would be read to include any individuals, including those married to a person of the same sex, who are lawfully married under any state law and that the term marriage would be read to include a same-sex marriage so long as it was legally recognized as a marriage under any state law. The DOL further provided that the terms “spouse” and “marriage” do not include individuals in a formal relationship that is not denominated a marriage under state law, such as a domestic partnership or civil union. The rule adopted by the DOL is one that recognizes marriages that are valid in the state in which they were celebrated, regardless of the married couple’s residence. The guidance provides that this rule is the least burdensome and is consistent with the core intent underlying ERISA of promoting uniform requirements for employee benefit plans.
5. How does Tennessee treat same-sex marriages?
Tennessee does not recognize same-sex marriage. Tennessee Code § 36-3-113 states that as a matter of public policy, “the historical institution and legal contract solemnizing the relationship of one man and one woman shall be the only legally recognized marital contract in the state in order to provide the unique and exclusive rights and privileges to marriage.” Similarly, the Tennessee Constitution, Article 11, section 18, provides that “the relationship of one (1) man and one (1) woman shall be the only legally recognized marital contract in this state.” The Constitutional provision goes on to state that “any policy or law or judicial interpretation, purporting to define marriage as anything other than the historical institution and legal contract between one man and one woman, is contrary to the public policy of this state and shall be void and unenforceable in Tennessee.”
6. Do any local governments in Tennessee provide benefits to the same-sex spouses of their employees?
In August of 2013, Collegedale became the first city in Tennessee to extend health insurance coverage to same-sex couples. Beginning in 2014, City employees who have a “family relationship” with another person outside of legal marriage (a significant other of any sex) will be extended health insurance for their families. A “family relationship” requires a continuous and committed relationship for six months or more with the intent to continue the relationship indefinitely. This may be proven by joint ownership of property, joint utility bills, or other documents indicating a continuous committed relationship. The relationship must also involve parties that are jointly responsible for each other’s welfare and financial obligations and they must reside in the same household. Finally, the individuals must not be related by blood to a degree of kinship that would prevent marriage under the laws of their state of residence, they must be at least 18 years old, and neither the employee nor the significant other may be married to a third party.
The City of Knoxville Mayor, Madeline Rogero, recently announced that Knoxville will be expanding its employee benefits to include benefits for qualified domestic partners of any sex. Beginning January 1, 2014, employee medical, dental, vision and dependent life benefits will be extended to same-sex and opposite-sex domestic partners. To be eligible for domestic partner benefits, an employee must complete an affidavit concerning their committed relationship and show proof of financial interdependence. The City cautions that for non-married couples, domestic partner benefits may be treated as taxable income by the Internal Revenue Service. Employees are encouraged to do their research and consider the tax implications of domestic partner coverage.
7. Has anyone ever challenged the Tennessee constitutional language prohibiting same-sex marriages?
There has not yet been a court decision regarding Tennessee’s constitutional prohibition of same-sex marriage. However, on October 21, 2013, four same-sex couples, legally married in other states, filed a joint complaint in the federal district court in Nashville alleging that the Tennessee Constitution’s prohibition of same-sex marriage violates the rights of same-sex couples under the U.S. Constitution. The couples argue that same-sex married couples have a protected liberty and property interest in their familial status under the Due Process Clause of the 14th Amendment. The couples further argue that they face discrimination because they are denied the protections, benefits and obligations that Tennessee state law affords to all other Tennessee residents who entered into valid marriages outside of the state. Finally, the couples argue that Tennessee’s stance on same-sex marriages impermissibly burdens the fundamental right to marry, discriminates based on sex and sexual orientation, and impermissibly burdens the fundamental right to travel between the states. The case is currently pending and a hearing date has not yet been set.
©2014 Kennerly, Montgomery & Finley, P.C. This publication is intended for general information purposes only and does not constitute legal advice or a legal opinion and is not an adequate substitute for the advice of legal counsel.