May 15, 2013

Minnesota Employers Affected by Same-Sex Marriage

Employers in Minnesota should consider how same-sex marriage will affect the benefits offered to employees, such as medical coverage and retirement plans, and employment practices. Generally, self-funded medical plans and retirement plans are not required, but can offer, coverage or survivor benefits, respectively, to an employee's same-sex spouse. For insured plans, new and renewed contracts underwritten in Minnesota will likely be required to cover a spouse of a same-sex marriage, but there should be future guidance on this and other interpretation issues.

Civil Marriage
On Tuesday, May 14, 2013, Governor Dayton signed into law a bill that revises the definitions and requirements of marriage. Marriage in Minnesota will no longer be limited to a man and a woman. Effective August 1, 2013, Minnesota will allow two individuals – of the same sex or the opposite sex – to marry, with certain existing exceptions for underage persons and certain familial relationships remaining in place.

The word "marriage" will be replaced with "civil marriage" in Minn. Stat. § 517.01 and certain other statutes. Wherever the term "marriage," "marital," "marry," or "married" is used in Minnesota statutes, such term will now include "civil marriage," effectively eliminating any distinction between opposite-sex and same-sex marriage under Minnesota law. Religious institutions will generally be exempt from recognizing a civil marriage if the marriage is in violation of its religious beliefs. The exemptions will extend to provision of services, goods, facilities, and performance of marriage ceremonies.

Effect on Employee Benefits
Whether employers are allowed or required to extend employee benefits to an employee's same-sex spouse will depend on the type of benefit and the law that applies to that benefit.

Welfare benefits provided by employers, such as medical, prescription drug, dental, vision, life and long-term care benefits, are either insured by an insurance company or self-funded. Self-funded benefits are generally paid from the employer's general assets and the employer may have a stop-loss insurance policy for catastrophic claims. Welfare plans are subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA) and state laws that relate to an employee benefit plan are generally preempted.

However, insurance contracts issued to employers that have insured benefits are subject to state insurance laws. Based on the rules of construction in Minnesota's civil marriage law, it is likely that Minnesota group health insurance contracts will extend coverage to a same-sex spouse if a "spouse" must be eligible for coverage. However, Minnesota insurance law cannot regulate the terms of the employer's plan, such as the portion of the premium paid by the employer for such coverage.

Retirement benefits provided by employers, such as a 401(k) plan or a pension plan, are subject to ERISA and, like self-funded welfare plans, state laws are generally preempted. Furthermore, at this time, ERISA requires that an employee in a same-sex marriage be treated as single for certain purposes, including required minimum distributions. This treatment as single for certain purposes is an example of the limitations of current federal law that prevents employers from providing identical treatment for all spouses. Within these limitations though, employers can design retirement plans to treat same-sex spouses similar to opposite-sex spouses. For example, a retirement plan can name a spouse, regardless of sex, as the default beneficiary, but employers are not required to do so.

Effect on Employment Practices
As for employment practices, Minnesota's civil marriage law will affect state discrimination protections and may impact employer leave policies. 

Protection for marital status discrimination under the Minnesota Human Rights Act (MHRA) will now extend to employees or applicants with same-sex spouses.  Minnesota already protects against discrimination based on sexual orientation, so the practical effect of this change may not be significant. 

As for leave entitlement, Minnesota's civil marriage law will not, at this time, extend leave under the federal Family and Medical Leave Act (FMLA) to same-sex spouses.  Although the FMLA currently defines spouse as provided for under state law, the FMLA is governed by DOMA (discussed below), which requires federal law to define marriage as a legal union between a man and a woman.  However, employers should evaluate their existing policies that may provide certain types of leave based on spousal relationships, such as non-FMLA medical leave, bereavement leave, or military leave.  Many employers may already extend these policies to domestic partners, however, existing policy language may need to be revised to avoid confusion or inconsistencies. 

State and Federal Marriage
Minnesota joins 11 other states and the District of Columbia in recognizing same-sex marriage. In the last two weeks, Delaware and Rhode Island joined Connecticut, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont and Washington as states that recognize same-sex marriage. California also recognized same-sex marriage for a period in 2008, and the status of California same-sex marriage is before the United States Supreme Court.

The federal Defense of Marriage Act of 1996 (DOMA) is also before the United States Supreme Court. Decisions in both of these cases are expected in June. Regardless of the outcome of those cases, Minnesota state laws will now recognize same-sex marriage. It is possible that federal law, in addition to state law, will be required to recognize same-sex marriage as a result of the Supreme Court's DOMA case. However, there are significant procedural issues with both cases and the Court may not even reach the merits of each case.

Next Steps
While waiting for future guidance the Supreme Court decisions, employers can review their current plans and practices and start thinking about what changes, if any, need to be made.

Minnesota employers should consider which benefits they want to, or in the case of insured benefits, may be required to, offer to same-sex spouses of employees. This decision may be influenced by legal compliance, by a focus on diversity and inclusion, or in response to requests by employees.

Employers should review all definitions of spouse and consider whether the current definitions reflect the employer's intentions. For example, employee benefit plans may define spouse as the employee's "legal spouse," and in Minnesota, effective August 1, 2013, that definition will include a same-sex spouse. Another common plan definition of spouse is a "DOMA spouse"—that is, an opposite-sex spouse as recognized under the federal Defense of Marriage Act. That definition would currently exclude a same-sex spouse, but will need to be reviewed again after the Supreme Court decision. In the alternate, employers may currently extend coverage or offer survivor benefits to same-sex domestic partners, and should consider whether those domestic partners will be required to be married for coverage and benefits now that marriage is available.

Once a decision has been made, the documentation and administration should be reviewed for consistency. The documentation – plan documents, insurance contracts, forms, employee communications, handbooks, enrollment materials and beneficiary designation materials – should all be reviewed in light of same-sex marriage. The administration – payroll and tax systems – will likely need to be reviewed due to the treatment under federal and state tax law. Human resources staff should be trained to answer questions that are likely to be raised by employees.

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