The decision of the United States Supreme Court in U.S. v.
Windsor, where the court struck Section 3 of the Defense of Marriage Act
(DOMA), will change many aspects of healthcare as it relates to same-sex
marriage.  The decision requires that the
federal government recognize same-sex marriages that are recognized under state


The Feds Follow the
The Court didn’t rule that the federal government must recognize all
same-sex marriage.  Instead they
determined that marriage is traditionally an issue for the states to

 States Follow Their Own
.  The Court did not
strike down Section 2 of DOMA, which provides that no state shall be required
to recognize a same-sex marriage that is recognized by another state. This
raises a number of issues for couples who move from state to state or who live
in a state that does not recognize same-sex marriage but travel to a state that
does and marry there.

 Retroactive?.  Another open issue is retroactivity. Windsor
did not specifically address whether same-sex couples have any retroactive
rights to any benefits. For example, suppose a 401(k) plan participant entered
into a same-sex marriage, designated someone other than the same-sex spouse as
beneficiary (without obtaining the spouse’s consent), and died before the
decision. Does the surviving spouse have a claim against the plan for survivor
benefits? Do same-sex couples have a right to claim refunds for health plan
benefits that were previously treated as taxable? The Courts and the IRS will
provide guidance on retroactivity at some point. 


In California, the Supreme Court, in a 5-4 decision issued on
the same day as U.S. v. Windsor, ruled against the backers of California’s
Proposition 8
gay marriage ban. With the court’s ruling, gay marriage is once
again officially legal in California. While many questions remain about the broader
constitutional issue concerning the right of gay and lesbian couples to get
married, June 26 will be remembered as the day California’s gay marriage ban


       1. Imputation of Income.
Same-sex partners will no longer pay federal taxes on income imputed for an
contribution to a same-sex spouse
medical, dental or vision coverage and employers will no longer be required to
pay federal payroll taxes on such amounts.

        2.     Employer Refunds.  Employers may be entitled to a refund for
payroll taxes previously paid.
Employers may be required to continue to impute income for state law
purposes in states that do not recognize same-sex marriage.

3.  Coverage.
Windsor does not address whether plans that provide spousal coverage must cover
same-sex spouses. Employers with self-insured plans subject to ERISA are not
required to cover spouses and if they do cover some spouses, they are not
necessarily required to cover all spouses. Employers with plans not subject to
ERISA would be subject to any applicable state laws regulating coverage.  The ACA requires coverage of offspring but
not spouses, same sex or not.

 4. Pre-tax premiums.
Employees with same-sex spouses may pay the cost of spousal health coverage by reducing
pay on a pre-tax basis.

 5. COBRA. Same-sex spouses have the same independent COBRA rights as
opposite-sex spouses.

 6.  Special
Enrollment Rights.
Marriage to or divorce from a same-sex spouse is now a
HIPAA special enrollment event under plans offering spousal coverage. Employees
may add a same-sex spouse to their health coverage outside of the open
enrollment period, if they marry or if the spouse loses coverage due to a job
loss or change.

 7.  Personal Representatives.  HIPAA provisions relating to providing
patient information will now clearly include same sex spouses. 

8.  Medical
Expenses Tax Treatment.
Eligible medical expenses incurred by a same-sex
spouse at least since the date of the Windsor decision are eligible for
tax-free reimbursement under health care flexible spending accounts, health
reimbursement arrangements, and health savings accounts. There may also be a
medical expense deduction.  An employee
and a same-sex spouse will share the deduction limit for HSA contributions and
the typical health care cost deduction.

 9.  Qualified Retirement Plans. Spouses have a
number of rights under qualified retirement plans (such as defined benefit and
401(k) plans) subject to ERISA. Some examples of these rights, which must now
be provided to same-sex spouses, include Qualified Joint and Survivor rights,
same-sex spouses who are divorced can obtain a qualified domestic relations
order dividing retirement benefits (QDRO’s), and other rights for spouses.


Impact on Medicaid/CHIP
the invalidation of DOMA, states that recognize gay marriage must treat
married, same-sex couples as part of the same household. To determine whether
an individual is eligible for Medicaid/CHIP, states assess a household’s
composition and countable income as a percentage of the federal poverty level.

Treating same-sex couples as spouses can make it more likely that they are eligible
for Medicaid/CHIP by increasing the size of their households or it can make a
household less likely to be eligible by increasing the total family income.
Ultimately, in terms of Medicaid/CHIP eligibility, whether a same-sex couple
benefits or loses from being treated as one household depends on the amount of
income each spouse contributes.

The DOMA decision will affect the access married, same-sex
couples have to many government programs, as well as to employer-sponsored
health insurance. With DOMA no longer in place:

spouses of federal employees will be entitled to federal healthcare           coverage.

spouses of military personal will be eligible to receive TRICARE           coverage.

           Individuals in
same-sex marriages
those in heterosexual marriages
be able to qualify for Medicare based
on a spouse
work history.



The FMLA now will provide entitlement to take leave to care
for a same-sex spouse to the same extent as an opposite-sex spouse.

Medicare Secondary Payer Rules

Same-sex spouses will now be treated as spouses, such that
plans covering spouses of active employees will be considered primary for
Medicare purposes.

Prohibited Transaction Rules

Spouses are treated as “family members” in
determining whether a person is a disqualified person for purposes of
prohibited transaction rules. Same-sex spouses are now disqualified persons to
the same extent that opposite-sex spouses are.

 Ownership Attribution Rules

 The same-sex spouse of a 5% owner of employer stock is now
considered to be a 5% owner by attribution, including for purposes of
identifying highly compensated employees and for top hat purposes.


 1.  Begin reimbursing
medical care expenses for same-sex spouses of participants.
Notify employees of the window (typically 30-days) under the
cafeteria plan for family status changes and special enrollment rights for
same-sex spouses and their dependents.

 2. Review definitional and choice-of-law provisions of benefit
plans concerning the definition of “spouse.”  Start obtaining spousal consent from same-sex
spouses for any defined benefit plan retirement distributions.

3. Advise employees married to same-sex spouses to review
their death beneficiary designations; if proper spousal consent has not been
obtained, their designations will be void.

4. Employers will want to ensure that same-sex spouses are
identified for its records in the same manner opposite-sex spouses are
identified. If the employer does not currently distinguish between same-sex
spouses and domestic partners in company records, for example, or identifies
opposite-sex spouses, but not same-sex spouses in its record keeping, the
employer should consider modifying its practices.

5.  Review all plan
documents, in particular the eligibility provisions, to determine if provisions
that were designed to provide coverage to domestic partners or same sex spouses
or designed to restrict coverage to opposite sex spouses should be changed or modified.

6.  Be sure that, at
least after the date of the Windsor decision, retirement plans in operation
provide lawfully married same-sex spouses residing in states where same-sex
marriages are recognized the benefit rights to which opposite sex spouses are
entitled. (See the lists above.)

7.  Cease imputing
income on health coverage and other benefits provided to same-sex spouses
residing in states that recognize same-sex marriage if income imputation is not
required for opposite-sex coverage.

 8. Permit employees to pay the 2013 cost of health care
coverage for lawfully married same-sex spouses residing in states where
same-sex marriages are recognized with pre-tax reductions in pay.

9.Consider whether to seek a refund for employment taxes paid
on imputed income for same-sex spouse benefits for open tax years.

10.  Begin a review of all
employee benefit plans, policies, procedures and handbooks to consider whether
changes are needed or desirable.

Matthew L. Kinley, Esq.