Employee Benefits- New York’s Marriage Equality Act Affects Employee Benefits

The New York State Marriage Equality Act (the “Act”) becomes effective as of tomorrow, July 24, 2011. The Act allows same-sex couples to be married in New York State. In general, it will also provide same-sex couples, married in New York or any other State, with the same legal rights and protections under New York State law that are afforded to married opposite-sex couples. One important question: does the Act apply to employee benefits offered at work? No and Yes.

Where The Act Will Not Apply. Some plans are subject to the requirements of ERISA and, in some cases, the Federal Defense of Marriage Act (the “DOMA”). For these plans, ERISA would preempt the Act. Also, when applicable, the DOMA says that, for purposes of Federal laws, a “spouse” is solely a husband or wife in an opposite sex marriage. Thus, the Act will not apply to these plans. Such plans include tax-qualified retirement plans (e.g., pension and 401(k)), nonqualified retirement plans, self-insured health plans and other self-insured welfare plans. The Act would also not apply to welfare plans funded with an insurance policy not subject to New York State law.

Where The Act Will Apply. ERISA does not preempt State insurance law. Thus, the Act will apply to a health care plan, or any other welfare plan, which is insured by a policy subject to New York State law. Accordingly, if the plan offers health care coverage (or any other type of coverage), or affords any other right or benefit, to a “spouse”, it must offer this coverage, right or benefit to the spouse of a same-sex marriage. Note that, unless the same-sex spouse is a dependent for purposes of federal income taxation, due to DOMA: (1) the cost of health care coverage provided, and any medical benefits paid, to the spouse of a same-sex marriage will be taxable for federal income tax purposes, and (2) an employee cannot purchase health care coverage for a same-sex spouse with pre-tax dollars under a cafeteria plan. The New York State taxation of health care coverage and medical benefits provided to same-sex spouses is not clear. It appears that the State will soon provide guidance on this matter.

Any questions?