Private Employment Issues and Benefits

Although discrimination against married same-sex couples under the Defense of Marriage Act (DOMA) did not bar private employers from offering most spousal employment benefits to employees’ same-sex spouses, it subjected same-sex couples to discriminatory tax treatment and other forms of unequal treatment.  For example, married same-sex couples had to pay additional income taxes on the value of employer-sponsored health insurance that married different-sex couples did not need to pay, and married same-sex couples who divorced were barred by federal law from obtaining a court order sharing pension benefits as part of a divorce agreement.   

Now that DOMA has been struck down, we urge married same-sex couples with employer-sponsored retirement benefits to immediately review your beneficiary designations and form of benefit elections to ensure that your designations and elections are accurate and complete, and that they reflect your wishes.  Your rights may have changed, and waiting may hurt you and your family.

This Guidance addresses some of the marriage-related issues regarding employer-sponsored retirement plans and health insurance benefits that are regulated by federal law. 

For more information about federal regulation of employee benefits, see:

http://www.dol.gov/ebsa/faqs/faq_compliance_pension.html

www.aging.senate.gov/crs/pension7.pdf


TABLE OF CONTENTS

1) What rights does federal law provide to married employees with respect to employer-sponsored health insurance benefits?

2) What rights does federal law provide to married employees with respect to private retirement benefits?

3) Which marriages will be considered valid by the federal government for benefits purposes?

4) Which employers are subject to the federal laws that regulate pensions and other employment benefits?

5) Does my employer have to change its health or pension plan before my spouse will be entitled to these protections, or will my spouse automatically be eligible?

6) What should I do I am told that my plan won’t cover my spouse? 

7) If my employer decides to start allowing spouses of the same sex to enroll in the health plan, when can I enroll my spouse?  Will I need to wait until open enrollment?

8) What if I got divorced while DOMA was still in effect, and I was unable to get an order sharing my retirement savings with my ex-spouse as part of my divorce?

9) What if my spouse retired or died while DOMA was in effect, and I was told I was not entitled to a spousal survivor annuity?


1) What rights does federal law provide to married employees with respect to employer-sponsored health insurance benefits?

Currently, federal law has not been definitively interpreted to require an employer to offer insurance to a spouse of the same sex, even if the employer offers coverage to different-sex spouses.  But, many employers do so already, and your state may have additional requirements that  insurance offered to different-sex spouses must be available to same-sex spouses.   (If your employee-health plan is self-insured, rather than a true insurance contract, it will not be subject to state nondiscrimination laws – this is because the federal law “pre-empts”, or overrides, those state laws, while still allowing states to regulate insurance.  You can ask your human resources department whether your plan is self-insured or an insurance contract.)  To find out more about your rights, you can also contact one of the legal organizations below.

Assuming your health plan offers your spouse coverage and you are considered validly-married by the federal government, you and your spouse should be eligible for the following additional federal protections:

  • The value of your spouse’s health insurance will not be treated as taxable income to you (the employee) or to your spouse.
  • Your spouse and children have the right to remain in your health plan if you lose your job or your hours are reduced, or if you divorce or separate.  This is known as “COBRA coverage” or “COBRA continuation coverage.”  While your employer has to allow you and your children and spouse to remain insured, you can be required to pay the full cost of those benefits.  (While nothing precludes a plan from providing continuation coverage to persons who are not qualified beneficiaries if they create appropriate plans, including domestic partners, such coverage is not required by federal law.)
  • While most health plans only let you enroll at specific times, marriage or divorce are “qualifying events” that will let you enroll or un-enroll outside those specific time periods.

In addition to these protections, you and your spouse may have other rights under state law. 

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2) What rights does federal law provide to married employees with respect to private retirement benefits?

If you are considered validly married by the federal government and eligible for a pension or other employer-sponsored retirement plan, federal law has specific requirements that your plan must follow in order to maintain tax-qualified status: 

  • The default form of benefit for a defined benefit pension plan  (i.e., a traditional pension that guarantees a specific monthly payment at retirement) must be a joint and survivor spousal annuity (QJSA).  This means that a portion of your pension will continue to be paid to your spouse if you die before your spouse does, although you and your spouse together can decide to waive this right and name someone else as the beneficiary. 
  • If you die before reaching retirement age, your spouse is entitled to a pre-retirement survivor annuity (QPSA) from a defined benefit pension plan.
  • Your spouse has to give written consent if you want to name anyone else as your beneficiary for your retirement plan. 
  • Being married entitles your spouse to greater options in taking distributions (regarding the timing of payments, and the amount you can receive) from your retirement plan, and to preferential tax treatment of those distributions.
  • Your plan may also allow you to take money out of a retirement account without tax penalty to pay expenses like medical costs, tuition, or funeral expenses for your spouse. 
  • Finally, if you get divorced, the courts can ensure that your ex-spouse receives a portion of your retirement plan assets as part of the divorce agreement.  This is called a Qualified Domestic Relations Order, or QDRO.

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3) Which marriages will be considered valid by the federal government for benefits purposes?

If you live in a state that respects your marriage:  The federal government will consider your marriage valid, and you have a right to all the protections that are required to be offered to spouses under federal law.

If you live in a state that doesn’t respect your marriage:  Both the Department of Labor and the Internal Revenue Service will recognize marriages if they were legally entered into in the state where they were celebrated, and regardless of whether the marriage is recognized in the state where the couple resides. If you encounter problems or have questions, contact one of the legal organizations listed below. 

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4) Which employers are subject to the federal laws that regulate pensions and other employment benefits?

These federal laws generally apply to employers that offer retirement and health benefits, sometimes referred to as “ERISA plans.”  Some of these requirements, particularly the retirement plan obligations, do not apply to federal, state, or local government employers, or to churches or religious associations or conventions of churches (although some religious employers choose to be governed by these federal laws).  Health plans maintained by private-sector employers with 20 or more employees, employee organizations, or state or local governments are covered by COBRA.

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5) Does my employer have to change its health or pension plan before my spouse will be entitled to these protections, or will my spouse automatically be eligible?

It depends on what your plan documents say, and may depend on which kind of benefit are at issue.  If your plan, like most, simply refers to “spouses,” your employer doesn’t necessarily need to change anything in order to include spouses of the same sex.  If your plan states that “spouse” means only different-sex couples, or is determined by reference to state law, your plan documents likely need to be revised to comply with federal law.  But, you and your spouse are entitled to protections in the meantime even if your plan doesn’t change its language.  (Again, it’s important to remember that for health insurance, if your plan is self-insured, while it can offer benefits, it isn’t currently required to do so.)

Talk with someone in your human resources department.  If you still have questions, contact one of the organizations listed below, or a lawyer who specializes in employee benefits.

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6) What should I do I am told that my plan won’t cover my spouse? 

If your employer or your retirement or health plan tells you that your spouse will not be treated as different-sex spouses are, it may be important to act quickly to preserve your rights.  Sometimes the issue can be cleared up with a conversation, but do not lose sight of the specific time limits to appeal determinations made by your plan.  Contact one of the organizations listed below, or a lawyer who specializes in employee benefits.

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7) If my employer decides to start allowing spouses of the same sex to enroll in the health plan, when can I enroll my spouse?  Will I need to wait until open enrollment?

It depends.   Generally, “marriage” is a qualifying event for adding a spouse to the health plan.  Even if you may have already been married for several years before DOMA was struck down, you should ask your employer if this change in federal law is a qualifying event.  It’s also possible that some plans will wait until the next open enrollment season in advance of a new plan year to allow employees to make changes to  their benefits to add spouses who had been unable to obtain coverage previously. 

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8) What if I got divorced while DOMA was still in effect, and I was unable to get an order sharing my retirement savings with my ex-spouse as part of my divorce?

Federal law has strong protections for your retirement savings, and generally prevents your plan from paying benefits to anyone but you or your beneficiary.  One exception allows you to share those savings with your ex-spouse as part of a divorce agreement. This is called a Qualified Domestic Relations Order, or QDRO.  If you were unable to obtain a QDRO when you divorced and now want to seek one, consult a qualified attorney about whether it is possible to re-open the divorce proceeding.

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9) What if my spouse retired or died while DOMA was in effect, and I was told I was not entitled to a spousal survivor annuity?

Talk with your plan administrator or an employee benefits lawyer.  It’s possible, though not certain, that you still might be able to receive a survivor annuity (QJSA or QPSA).  If you did, that might mean that you would have to re-pay some of the money your spouse had already received from the plan. 

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Contact:

American Civil Liberties Union

National Center for Lesbian Rights

Gay & Lesbian Advocates & Defenders

Lambda Legal

This series of fact sheets produced together by:
American Civil Liberties Union | Center for American Progress | Family Equality Council | Freedom to Marry | Gay & Lesbian Advocates & Defenders | Human Rights Campaign | Immigration Equality | Lambda Legal | National Center for Lesbian Rights | National Gay and Lesbian Task Force | OutServe-SLDN.