Last week, the nation’s highest court was very busy, ruling first on healthcare, and second, on gay marriage.
In its much anticipated decision in King v. Burwell, the Supreme Court upheld the availability of the Affordable Care Act’s (ACA) federal subsidies for individuals in low and middle income households to purchase health insurance on health insurance exchanges established in each of the fifty states (and District of Columbia.) In a 6-3 decision authored by Chief Justice Roberts, the Court determined that it would “make little sense” to treat the federal exchanges differently from state exchanges, and further upheld employer penalties for failure to follow the law.
The takeaway from this decision (and the second challenge to the constitutionality of ACA in as many years) for employers is that it effectively upholds the ACA’s employer mandate or “employer shared responsibility” provision, which requires larger employers to provide minimum levels of affordable health coverage to their full-time employees or risk paying significant penalties. Employers and plan sponsors should continue their efforts to both understand the application of the ACA and ensure compliance or be prepared for the financial impact of non-compliance.
Secondly, in a landmark decision, the Court ruled, 5-4, that the Fourteenth Amendment requires a state to license marriage between two people of the same sex and to recognize marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state.
For employers, this decision will have many tax and benefits consequences, primarily that any benefit plan offering spousal coverage will now confer such benefits on same-sex spouses.
Encouragingly, multi-state employers having to administer plans subject to a non-uniform mixture of state and federal laws regarding the recognition of their employees’ same-sex marriages will now enjoy greater administrative simplicity.
The decision will not result in a change for employers’ qualified retirement plans because after the U.S. v. Windsor decision handed down by the Court in 2013 (which struck down part of the federal Defense of Marriage Act), the IRS issued guidance providing that for federal tax purposes the IRS applied a “state of celebration rule.” Thus, for qualified retirement plans, which rely on the Internal Revenue Code definition of spouse, same-sex spouses are already considered spouses for the purpose of those plans. The Court’s ruling will likely increase the number of people considered spouses, but should not require a qualified retirement plan change.
Employers will also want to consider the following steps:
- FMLA leave: Same sex spouses will be considered spouses under the Family Medical Leave Act (FMLA) no matter where the marriage takes place or where the employee resides. Obviously, this means that eligible employees can take FMLA leave to care for their same-sex spouse, for qualifying exigency leave if the spouse is being deployed, and other qualifying reasons. Employers should update their forms and policies accordingly, and ensure they have no language to the contrary in these policies.
- Bereavement and other leaves: Again, like FMLA leave, make sure your policies reflect the new law and equally important, ensure you have no language to the contrary. If you have any other leave policies that define immediate family or extend to other familial situations, update those definitions as well. (Remember, this does not apply to same-sex partners – only to same-sex spouses with contractual marriage rights.) Review your personnel handbook, any policies on your intranet, plan documents, forms, etc. and train your human resources professionals and supervisors on the changes.
- In general, update emergency contact forms, beneficiaries, W-4 forms and withholding information requests. The onus for these updates is on the employee, but employers should be prepared to administer these changes.
- There are additional tax implications by the Court’s ruling regarding employers’ health and welfare benefits which may need to be addressed, and employers should seek advice from their tax professionals.
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