How Supreme Court Gay Marriage Ruling Affects Employee Benefit Plans

June 26, 2015

Following the historic Supreme Court decision that same-sex couples have a national right to marry, employers offering domestic partner benefits to unmarried couples may pull back on that offering since employees in all states will be able to marry.

Meanwhile, the 77 percent of companies currently offering same-sex healthcare coverage should be able to streamline their benefits administration, while those not currently offering coverage to same-sex employees may have to make changes to do so, according to consultants at Aon Hewitt.

The Supreme Court ruling (Obergefell v. Hodges) overturned same-sex marriage bans in four states — Michigan, Kentucky, Ohio and Tennessee — and effectively legalized same-sex marriage across the country.

“With today’s ruling, employers will need to consider how best to design their employee benefits plans to attract and retain the best talent,” said J.D. Piro, senior vice president and national practice leader in the Aon Hewitt Health Law Group. “Some employers may move toward offering spousal benefits under one common umbrella. Others will continue to offer benefits coverage to both same-sex and opposite-sex domestic partnerships, while also recognizing the broader definition of marriage endorsed by the Supreme Court. As companies decide on a strategy, they will also want to consider the impact of state and local laws requiring employers to offer domestic partner benefits.”

According to Aon Hewitt, allowing same-sex marriage across the country will also likely ease the administrative burden on employers by providing administrative consistency across states. Today, same-sex spousal benefits coverage largely varies state-by-state depending on the legality of same-sex marriage in that state.

Gay married couples will now be able to file joint state tax returns and have other financial options available to heterosexual married couples.

Related: How Supreme Court Marriage Ruling Affects Gay Couples’ Finances

Aon Hewitt says there are other changes that employers and individuals need to consider including:

Changes for Employers

  • Employers may need to make administrative changes to cover same-sex spouses in states where they were not previously covered. For example, employers will need to modify enrollment processes and create or modify consent and eligibility forms.
  • The state income tax treatment of employer-provided benefits could change for individuals with same-sex spouses. While further guidance will be needed, it will eventually be unnecessary for employers to continue to calculate imputed income.

Changes for Workers

  • Eligibility rules for employer-provided benefits could change, which would open up eligibility to same-sex spouses in all states. In contrast, employers might discontinue same-sex domestic partner benefits, if all employees are able to marry in their state. Employees should check with their employer about any possible changes to their benefits or necessary administrative steps they may need to take to ensure coverage.
  • With anticipated changes to the state income tax treatment, workers with same-sex spouses covered by employer plans will no longer need to pay imputed income on those benefits.

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