Same-Sex Relationships and Employee Benefits

The federal Defense of Marriage Act (DOMA) defines “marriage” as between one man and one woman, thereby restricting the definition of “spouse” to an opposite sex partner for purposes of federal law and benefits. With the state laws varying so dramatically in this arena, the rights available to same-sex partners–particularly in the workplace–are often hard to determine and may differ even from business-to-business let alone from state-to-state.

State Differences

In 2015, same sex marriages anywhere in all 50 states was legalized by the U.S. Supreme Court. The implementation of the Supreme Court order legalizing gay marriages was not without push back by a some states. Louisiana, Alabama, Mississippi, Tennessee, and Kentucky were among a handful of states that held off before  recognizing such unions.

Though gay marriage is largely unchallenged anywhere in the U.S. since the Supreme Court decision, the Court did not decide all marriage related issues they face. Among the uncertainties are the patchwork of laws that differ widely from state to state as to their rights in the area of adoption, custody, housing choices, buying property, and spousal benefits.

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Rights to Health Coverage

Generally, employers can decide whether to provide health care coverage to employees, and whether to extend that benefit to spouses. No federal law prohibits employers from providing benefits to employees’ same-sex partners or spouses; neither does any federal law require it. Whether your employer is “fully-insured” or “self-insured” impacts what benefits you’re entitled to as a same-sex spouse or partner. If your employer is self-insured (assumes the costs and risks of insuring its employees rather than buying insurance from an insurance company), its health coverage is governed by federal law and regulation, such as DOMA.

On the other hand, an employer who purchases health insurance coverage from an insurance company is considered “fully insured” and must comply with the laws of the state where it is located. Some states such as, California, New Jersey, and Hawaii, which recognize same-sex relationships, prohibit discrimination in benefits between same-sex and heterosexual couples.

In California and Massachusetts, employers with state-regulated health plans must extend coverage to same-sex spouses of employees if they do so for opposite-sex spouses. Additionally, in California, health care service plans and insurers must provide health care coverage to domestic partners that is equal to the coverage provided to spouses.

California and some cities and counties (for example, Los Angeles, San Francisco, Miami Beach, and Seattle) have equal benefit ordinances which require that employers with state or municipal contracts of at least a certain amount provide the same benefits to employees’ domestic partners as are provided to spouses.

Income Tax and your Health Benefits

Generally, employer-provided health coverage benefits are exempt from both federal and state income and payroll taxes. However, due to federal law, health benefits provided to a domestic partner or same-sex spouse will be subject to federal income and payroll taxes.

California, Massachusetts, Connecticut, Oregon, Vermont, and the District of Columbia do not impose state income tax on employer-provided health benefits to same-sex partners and/or spouses. In those states, employers have to perform two sets of calculations to determine an employee’s taxable income-one for federal tax purposes and one for state. In California and Massachusetts, same-sex spouses and opposite-sex spouses file state taxes in the same way. Registered domestic partners must use the same filing status as married couples in California. For more information, visit California’s Franchise Tax Board website.

Family and Medical Leave

The federal Family and Medical Leave Act (FMLA) provides for unpaid leave in order to care for a spouse with a serious health condition, among other reasons. Due to the DOMA, it does not apply to domestic partners (same- or opposite-sex) nor to same-sex spouses. Individual employers’ policies, however, can provide family and medical leaves to employees in same-sex relationships, even if the law does not require them to do so.

Some states including California have family and medical leave laws similar to the FMLA, but which provide time off to care for a same- or opposite-sex partner or spouse. Massachusetts provides state employees unpaid leave of absence of up to 26 weeks for the same reasons as under the federal Family and Medical Leave Act, including to care for an immediate family member such as a spouse who has a serious health condition. Visit the National Conference of State Legislatures website for information on family and medical leave statutes in your state.

Case Studies: Same-Sex Relationships and Employee Benefits

Case Study 1: Inconsistent State Laws

John and Michael, a same-sex couple, both worked for different companies located in different states. John’s employer offered comprehensive health coverage to same-sex partners, including Michael.

However, Michael’s employer, located in a different state, did not provide any benefits to same-sex partners. This case highlights the challenges faced by same-sex couples when state laws vary, leading to disparities in employee benefits based on geographical location.

Case Study 2: Overcoming Legal Barriers

Sarah and Emily, a married same-sex couple, faced initial resistance from their employer in extending spousal benefits. However, they engaged in open discussions with their company’s HR department, educating them about the legal rights of same-sex spouses after the Supreme Court ruling.

As a result, the company revised its benefits policy to include equal coverage for all legally married couples, regardless of their sexual orientation. This case demonstrates the importance of advocacy and open dialogue in promoting inclusive employee benefits.

Case Study 3: Tax Implications and Financial Planning

Alex and Jamie, a same-sex married couple, were initially unaware of the tax implications of their employer-provided health benefits. They discovered that while their health coverage was tax-exempt at the state level, it remained subject to federal income and payroll taxes due to DOMA.

To optimize their financial planning, they consulted a tax professional who helped them explore alternative strategies, such as maximizing pre-tax contributions to their health savings accounts (HSAs). This case underscores the need for same-sex couples to consider the unique tax implications and seek expert advice for effective financial planning.

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