There are more than 1,100 federal benefits that married same-sex couples are now entitled to in the post-DOMA world. But those pertaining to retirement and health care plans are among the most important areas that the couples and employers should be concerned with, said Jason Rothman, a shareholder at the law firm Ogletree, Deakins, Nash, Smoak and Stewart in Cleveland.
Six months after the decision of United States v. Windsor, the LGBTIQ community and its allies finally realized their goal of marriage equality after nearly four decades when the U.S. Supreme Court invalidated Section 3 of the Defense of Marriage Act last summer.
The high court’s ruling determined the federal government must recognize same-sex marriages performed in states where they are legal. As a result, married same-sex couples will be able to enjoy the same federal benefits as married heterosexual couples.
Because Section 3 was struck down, plus the increasing percentage of the population living in a freedom-to-marry state, more closeted workers could be coming out in their professional lives, if not their personal lives, in order to take advantage of the numerous federal Social Security, tax and health benefits afforded to married couples.
The Supreme Court’s decision has given plenty for employers to think about. There’s the potential for workplace discrimination issues to arise, which means employers may be re-evaluating their harassment policies. Additionally, the Windsor decision requires many companies to alter their benefits programs, especially when it comes to retirement and health care plans.
A Complicated Subject
While the overturning of Section 3 of DOMA could potentially lead to more gay employees coming out at work and thereby increasing the chance for backlash against them, James Esseks, director of the American Civil Liberties Union’s LGBT and AIDS Project, said he has not noticed an uptick in discrimination against lesbian, gay, bisexual, transgender, intersex and queer employees in the public sector since that section of the law was struck down. The ACLU does not deal with discrimination in the private sector.
Nonetheless, Esseks brought up the point that openly gay employees, in both the private and public sectors, have always faced the possibility of discrimination because of their sexual orientation or gender identity regardless of the legal framework in place.
That legal framework is changing — along with public opinion on LGBTIQ rights.
The Windsor decision requires many companies to alter their health and retirement benefits programs.
The fight for marriage equality began in Minnesota when a gay couple was denied a marriage license. In 1972 the Supreme Court upheld the rulings of lower courts that denied the couple their marriage license, establishing a precedent of exclusion against the LGBTIQ community.
In 1993, Hawaii’s Supreme Court ruled bans against same-sex marriage violated the state constitution’s equal-protection clause. The lawsuit was a fleeting victory in the struggle for equal marriage rights for same-sex couples, as the ruling was voided by an amendment to Hawaii’s constitution that restricted marriage to opposite-sex couples five years later. Two years before Hawaii’s constitutional amendment to outlaw gay marriage was ratified, then-President Bill Clinton signed DOMA into law.
In the summer of 2013 the Supreme Court struck down Section 3 of DOMA and dismissed a challenge to California’s anti-gay marriage law, Proposition 8, which consequently restored same-sex couples’ freedom to marry in the state.
Inclusiveness Is Name of the Game
Eliminating discrimination in a diverse workplace comes down to creating an inclusive workplace.
Edna Chun, associate vice chancellor for human resources services at the University of North Carolina at Greensboro, stressed the importance of inclusiveness in creating a safe workplace environment for LGBTIQ employees. As a sensitive subject, even the slightest behaviors or words could be offensive, even unintentionally.
For example, the word “tolerant” seems to be a positive way to describe a workplace culture friendly to all minority groups. However, the tolerance implies “you’re just living with difference,” rather than accepting difference as part of the fabric of the organization and the workplace, Chun said. A manager who’s simply tolerant of difference can still promote an exclusive workplace by favoring colleagues and subordinates similar to themselves. Recognizing biases — implicit or otherwise — and changing behavior accordingly helps create an inclusive workplace.
“As an HR person, my main concern is not trying to change people’s minds. I’m trying to change their behavior and the way they interact in the workplace,” Chun said. “Obviously no one can or wants to change [somebody’s] whole framework and thinking and so forth, but what we can ask of our employees is that they be accepting of difference and that they treat others fairly regardless of any ascriptive they have and that they express themselves in collegial manners.”
Employers can have employees go through harassment and discrimination training, enact inclusive policies and follow laws set forth by state legislatures, but if middle managers don’t uphold those rules and laws, a workplace is likely to remain exclusive. Such an environment carries the potential for conflict, and consequently there’s a risk that a costly harassment claim could be filed against an organization.
“I think there’s definitely a role for leadership by the companies in terms of saying, ‘We live in a diverse society and LGBT people are part of the United States, part of whatever the state is, and part of our company, and we’re treating them the same way as anybody else that’s married,” said James Esseks, director of the American Civil Liberties Union’s LGBT and AIDS Project.
As of November 2013, one-third of the total U.S. population now lives in a state where same-sex marriage is legal, and 55 percent of U.S. adults support gay marriage, according to a Bloomberg National Poll conducted Sept. 20-23, 2013.
Those numbers are heartening for supporters and advocates of LGBTIQ rights, especially when comparing the 55 percent of individuals who said they support gay marriage in 2013 with the 42 percent in 2006.
But that still leaves a large group of people who do not support LGBTIQ rights, and therefore the potential for conflict between advocates and allies and their opposition remains.
“The fact that Section 3 of DOMA has been struck down doesn’t, in and of itself, create any new conflict for people with deeply held beliefs around homosexuality. Their beliefs will be their beliefs no matter what the legal framework is,” said Teddy Basham-Witherington, chief marketing officer of San Francisco-based Out & Equal Workplace Advocates.
To minimize the threat of conflict and reduce the chance for discrimination or harassment claims, it’s important for employers to clearly convey expectations for professionalism in the workplace. In states that have laws prohibiting discrimination on the basis of sexual orientation and gender identity, protecting LGBTIQ employees from discrimination and harassment is similar to protecting other minorities under Title VII of the Civil Rights Act of 1964. Even in states without laws that prohibit sexual orientation and gender identity discrimination, companies are still able to draft policies to prevent it.
“It presents a big challenge, trying to get alignment on it. It just has to be very clear — what is OK and what isn’t OK,” said Ingrid Fredeen, vice president of the Ethical Leadership Group for Navex Global, a compliance software company.
Harassment policies come into play when an employee does something that may create an unsafe workplace environment for a co-worker, Fredeen said. An effective harassment policy limits the kinds of things an employee can say while also holding him or her accountable if they “step over the line.”
Retirement and Health Care Plans
When it comes to retirement benefits for married same-sex couples in the post-Windsor world, naming a beneficiary for a plan is an important thing to keep in mind, as well as spousal annuities for pension plans, as preparation for an unexpected death, for example.
There could be a situation where an employee in a same-sex marriage would like his or her parent to be the beneficiary of the employee’s 401(k) plan account in the event of the employee’s death. If that employee dies without having his or her spouse sign off on the beneficiary designation form naming the parent as beneficiary, the beneficiary designation would not be recognized and the spouse would receive the plan’s benefits as the default beneficiary under the terms of the 401(k) plan, Rothman said.
Additionally, there are better 401(k) rollover distribution benefits for the surviving spouse in the event of death, which means the sum being combined with an existing plan would be taxed less.
Some retirement plans also offer hardship benefits for spouses. Post-Windsor, an employee could be eligible for a hardship distribution to help pay for a same-sex spouse’s medical bills.
With respect to health benefits, DOMA has never prohibited employers from offering private benefits to LGBTIQ employees and their spouses; but now that Section 3 is invalid, those benefits will be taxed differently.
“Prior to the decision, if employees wanted to cover their same-sex spouse, they paid for that coverage on an after-tax basis. They couldn’t pay for that coverage on a pretax basis under a plan’s cafeteria plan. So there’s the benefit of a pretax payment of premiums,” Rothman said.
Same-sex spouses are now also eligible for Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, and Health Insurance Portability and Accountability Act, or HIPAA, benefits.
The Nitty Gritty
The Windsor decision has made life difficult for Internal Revenue Service agents.
After the Windsor decision was announced, the IRS released Revenue Ruling 2013-17 (tinyurl.com/IRS-Windsor), which established Sept. 16, 2013, as the date that “the terms ‘spouse,’ ‘husband and wife,’ ‘husband,’ and ‘wife’ include an individual married to a person of the same sex if the individuals are lawfully married under state law, and the term ‘marriage’ includes such a marriage between individuals of the same sex” for federal tax purposes.
Deciding on the Sept. 16 deadline seems to have been the easy part for the IRS. Within Ruling 2013-17, the tax agency stated it would later release if and how federal benefits would be distributed to same-sex couples married before the Sept. 16 threshold. After nearly four months, the IRS issued that guidance on Dec. 16, 2013, under the title Notice 2014-1 (tinyurl.com/IRS-2014-1).
“One question that had been outstanding before 2014-1 was would you be able to, now, in the wake of the Windsor decision, be able to make an election to add your spouse to your health care plan? The IRS answered in the affirmative in 2014-1,” said Patricia Cain, chair of the Employee Benefits & Executive Compensation Practice at law firm Neal, Gerber & Eisenberg in Chicago.
The recently released guidance also provides answers for issues related to flexible spending account reimbursements for expenses of a same-sex spouse, contribution limits for health savings accounts and dependent care assistant programs, Cain said.
According to the IRS, 2014-1 “contains special administrative procedures for employers who want to make adjustments or claims for refund or credit of employment taxes paid with respect to the value of same-sex spousal benefits that are excludable from the income and wages of an employee under the Windsor decision, as interpreted by Rev. Rul. 2013-17.”
A Sensitive, Evolving Subject
Many companies understand the importance of including protections for LGBTIQ co-workers in their harassment policies. According to the Human Rights Campaign, 88 percent of Fortune 500 companies have nondiscrimination policies that include sexual orientation, while 57 percent include gender identity.
As the increasing number of states that allow same-sex marriage and the public opinion polls suggest, though, this is a trend that is likely to continue — especially if the Employment Non-Discrimination Act eventually becomes law. ENDA would amend Title VII to include sexual orientation and gender.
Until blanket federal discrimination protections appear for LGBTIQ employees, experts say employers hoping to stay ahead of the curve should build inclusive workplace environments by stressing the commonalities shared by an employee population rather than the differences.
“There are many intersections and many points of commonality and convergence, and what tends to happen when this is looked at, what sticks out, are the points of tension and contention rather than those points of confluence and concord, which are existing evermore increasingly,” Basham-Witherington said. “I think there was a time when it was a little more stark, but now it’s much grayer.”