The Supreme Court’s decision to declare unconstitutional key provisions of the Defense of Marriage Act is expected to mean a major overhaul of federal rules affecting employee benefits administration and payroll operations.
For benefits managers, the ruling – striking down a key section of the hotly contested 1996 law that prohibits federal recognition of same-sex marriages– also means more confusion while they wait for more legal rulings and IRS rules to come.
Under the ruling, same-sex marriage legally wed where allowed by various states now must be treated as spouses under the U.S. tax code, ERISA, and more than 1,000 other federal laws.
The ruling in the DOMA cases well as in California’s Proposition 8 battle take effect immediately and, according to Mercer, possibly even retroactively.
The firm issued a series of recommendations on same-sex marriage for HR managers. Among them: If marital status affects the delivery of benefits to an employee’s same-sex spouse or that spouse’s child, employers may need to amend the plan’s “spouse” definition.
They also will likely need to reprogram tax reporting systems; update enrollment forms, distribution election packages, tax notices, beneficiary designation forms and the like.
One of the first big changes likely to be seen nationwide: Employees who are legally married to same-sex partners will want to amend their W-4 forms, updating their tax filing status as “married.”
“Things are a lot more complicated now than they were yesterday,” said Todd Solomon, an employee benefits attorney with the Chicago office of McDermott Will & Emery and author of “Domestic Partner Benefits: An Employer’s Guide.”
“You could say a lot of things about the Defense of Marriage Act, but there was clarity. Now it is kind of a giant mess, at least tentatively.”
Even those who praised the same-sex marriage ruling acknowledged the challenges ahead.
Striking down DOMA “frees employers from a number of financial and administrative burdens, and we applaud the court’s ruling,” James A. Klein, president of the Washington-based American Benefits Council, said in a statement. “Of course, this ruling brings new challenges, as employers now must be mindful of significant variations in state laws regarding same-sex couples.”
DOMA, of course, is a federal law, and only 12 states now recognize same-sex marriages. The Supreme Court struck down only one section, which stated that marriage is between a man and a woman.
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