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DOMA Ruling Puts Gay Couples on Equal Benefits Footing

Now that the Defense of Marriage Act is defunct, employers will be able to provide equal benefits packages for all employees.

June 26, 2013
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Supreme Court

The U.S. Supreme Court ruled the Defense of Marriage Act of 1996 is unconstitutional on June 26. The act defined marriage as being between a man and a woman.

The 5-4 decision will bring changes for both the public and private sectors of the U.S. economy, as the decision will likely affect things like employee benefits packages.

Essentially, the ruling ensures same-sex couples will be able to enjoy the same federal benefits as heterosexual couples, as it requires same-sex couples married under state law to be recognized as legal by the federal government.

"People who are married will be treated as married for the 1,100 federal rights and benefits that apply to all married couples," said Hunter Carter, a partner at the law firm Arent Fox in New York. "The most important are social security, taxes, federal pensions, federal worker benefits for federal employees and, of course, immigration."

The case was brought to trial by plaintiff Edith Windsor, who married Thea Spyer in Ontario, Canada, in 2007. The state of New York recognized their marriage as legal. In 2009 Spyer died, and left her estate to Windsor, who was required to pay an inheritance tax of $363,053. She applied for a refund from the Internal Revenue Service, appealing to the federal exemption on inheritances for surviving spouses. However, the IRS denied Windsor her refund because Windsor and Spyer's marriage did not fit the definition provided by Section 3 of DOMA, according to the Supreme Court decision.

Justice Anthony Kennedy, who penned the majority opinion, ruled DOMA deprived same-sex married couples of "equal liberty of persons" protected by the Fifth Amendment of the U.S. Constitution.

"DOMA's principal effect is to identify and make unequal subset of state-sanctioned marriages. It contrives to deprive some couples married under the laws of their state, but not others, of both rights and responsibilities, creating two contradictory marriage regimes within the same state," Kennedy wrote.

While the Court's decision now extends federal benefits to same-sex married couples, it will affect benefits offered by employers, too—such as spousal protections, retirement plans and other employee benefits, according to a written statement released by Mercer's Washington Resource Group.

Gay couples must now be treated equal to straight couples under U.S. tax code, the Employee Retirement Income Security Act, and more than 1,000 federal laws, according to Mercer.

"The rulings take effect immediately (possibly even retroactively). If marital status affects the delivery of benefits to an employee's same-sex spouse or that spouse's child, employers may need to amend the plan's 'spouse' definition; reprogram tax reporting systems; and update enrollment forms, distribution election packages, tax notices, beneficiary designation forms, SPDs [summary plan descriptions], and the like," according to Mercer.

In addition to providing equality to individuals regardless of sexual orientation, the decision will allow employers to provide equal benefits to all employees, including tax-exempt insurance for the spouses of gay employees.

Carter added that there are many companies that already treat gay and straight couples equally, providing insurance for all employees and their spouses regardless of sexual orientation. But providing insurance for same-sex couples is not tax exempt.

Declaring DOMA unconstitutional will likely change that.

"Employers coming out-of-pocket to help pay for those benefits—now they're going to save money. Those benefits are going to be tax-exempt for opposite-sex and same-sex couples alike," he added.

Max Mihelich is a Workforce associate editor. Comment below or email mmihelich@workforce.com. Follow Mihelich on Twitter at @workforcemax.

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