Compensation and Benefits
CLIENT E-ALERT
July 2010
Defense of Marriage Act Declared Unconstitutional
The Defense of Marriage Act ("DOMA"), signed by President Clinton in 1996, was declared unconstitutional on July 8, 2010 by a Federal District Court judge in Massachusetts. DOMA states that for purposes of interpreting any federal law that a person will not be considered married unless the spouse is of the opposite sex. The decision, Gill & Letourneau v. Office of Personnel Management, will most likely be appealed by the Department of Justice, although President Obama has expressed personal dislike of DOMA and believes that Congress should repeal it.
Judge Tauro held:
"DOMA fails to pass constitutional muster even under the highly deferential rational basis test. . . . This court is convinced that there exists no fairly conceivable set of facts that could ground a rational relationship between DOMA and a legitimate government objective. DOMA, therefore, violates core constitutional principles of equal protection."
What does this decision mean for employee benefit administrators? At the moment, nothing. Assuming that the case will be appealed, it is not a final decision, so it is still necessary for federal purposes (primarily the Internal Revenue Code) to administer benefit plans with special "same-sex" idiosyncrasies. As a refresher:
- For health plans, it is required to impute federal taxable wages to an employee equal to the "value" of a same-sex spouse's coverage, unless the same-sex spouse qualifies as a federal health care dependent, i.e. has the same principal abode as the employee for the year and receives more than 50% support from the employee. The IRS refuses to opine on "value" for this purpose, so the typical approach is to impute the single premium COBRA cost, less any 2% COBRA surcharge. Some employers impute less, theorizing that the federal government does not have a strong appetite for enforcement in this sensitive area.
- Complicating this, there is no imputed Massachusetts taxable income to employees who have same-sex spouses. So the federal and Massachusetts definitions of taxable income are at odds because of DOMA.
- For Section 125 cafeteria plans with medical and dental reimbursement accounts, no reimbursement is allowed for a same-sex spouse, unless the spouse qualifies as a federal health care dependent (see No. 1 above).
- For FMLA, there is no federal right to unpaid leave to care for a non-DOMA spouse.
- For qualified pension plans, it may not be allowed to offer a joint and 100% survivor annuity if the same-sex spouse is more than ten years younger than the employee, due to "incidental benefit" rules which do not apply to DOMA spouses. (There is a special table in the regulations for this little understood provision.)
On a larger scale, the Court found that there are actually 1,138 federal laws which tie rights, benefits, and responsibilities to marital status. This includes Social Security, the ability to file a joint income tax return, and the power to sponsor an alien spouse for naturalization. So the final resolution of this case in the federal appellate system will be watched by many stakeholders.
CONTACT
We will keep you posted. In the meantime, if you have any questions about how this may affect your workplace, or if any of the current DOMA rules mentioned have caught you by surprise, please email the author, George L. Chimento.
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