Same-Sex Marriage: Thinking About Employee Benefits (Posted on December 28, 2012 by )


Carol V. Calhoun
Carol V. Calhoun, President
Calhoun Law Group, P.C.
9112 Lindale Drive
Bethesda, MD 20817-3441
Office Phone: (202) 441-5592
Telefax: (301) 564-1941
E-mail: Click here to send e-mail.

Part 1 – Private Employers
Part 2 – Governmental and Religious Employers

Part 1 – December 14, 2012 – Private Employers

Same-sex marriage is legal in Maryland as of 2013. Couples previously married outside of Maryland or planning marriage here, may be asking whether employers will treat them the same as other married couples with respect to employee benefits. This article discusses the rules applicable to private (nongovernmental) employers, other than churches. Next issue we’ll discuss the rules that apply to other types of employers. So bring on the questions!

Health Benefits

I work for a private employer which offers health benefits to spouses of employees. Does my employer have to allow me to cover my spouse under the health plan?

Generally, no. Employee benefits of private employers are governed by federal law, which does not recognize same-sex marriage.

Under what circumstances might my employer allow me to cover my spouse under the health plan?

Any rights to spousal health coverage under your employer’s plan would be dependent on your employer having entered into a contract to provide such coverage. Typical ways in which this might occur include:

  • Inclusion of same-sex spouses under the terms of the health plan itself.
  • A union agreement calling for coverage of same-sex spouses.

If my employer covers same-sex spouses of employees under its health plan, what are the tax consequences to me?

It depends on whether your spouse is your “dependent.” To be a dependent, your spouse must live with you, receive over one-half of his or her financial support from you, and meet certain other tests.

If your spouse is not a dependent, any employer-paid premiums for health insurance are treated as income to you for tax purposes. Any employee-paid premiums for your spouse’s health insurance are made on an after-tax basis, even if premiums for your own coverage are made on a pretax basis. This also means that as a practical matter, your spouse cannot participate in a flexible spending account for health benefits, as such an account would not generate the tax benefits that are the reason for such an account.

If your spouse is a dependent, the tax consequences of covering your spouse are the same as if the your spouse were of the opposite sex. However, it can be expected that the employer will require documentation of the dependency.

What rights does my spouse have if he or she loses coverage under my health plan?

Federal law provides for an opposite-sex spouse to have the right to continue health insurance at his or her own expense for 18-36 months if he or she loses coverage due to certain events, e.g., job loss by the employee or the couple’s divorce. While Maryland has its own continuation law, it allows for only 12 months of continuation.

Retirement Benefits

Is my employer required to provide my spouse with rights under my pension, 401(k), or other retirement plan?

No. Federal law requires that a spouse be provided with survivor rights under most retirement plans. However, because federal law does not recognize a same-sex spouse, these rights are not automatically available to your same-sex spouse.

Can I name my same-sex spouse as beneficiary under my retirement plan?

Generally, yes. While a few plans provide a survivor benefit only if an employee is married, the more modern trend is to allow an unmarried employee, or an employee with a same-sex spouse, to name anyone as the beneficiary.

If I name my same-sex spouse as the beneficiary of my retirement plan, will he or she have the same rights as a spouse?

Typically, no. A married employee normally cannot change the beneficiary to anyone other than the spouse without the spouse’s written consent. However, because a same-sex spouse is not recognized as a spouse, you could name your spouse as your beneficiary initially, but still change your beneficiary at a later date. And your spouse would have no right to know about, much less veto, the change.

If I name my same-sex spouse as the beneficiary of my retirement plan, what are the tax consequences?

Taxes on a distribution can be deferred by rolling the money over to another plan. Same-sex spouses are more limited than opposite-sex spouses both in the types of plans to which a rollover can be made and in the time at which distributions must be taken.

Part 2 – December 28, 2012 – Governmental and Religious Employers

Last issue, we discussed your rights as a married same-sex couple if you work for a private employer. This article discusses governmental and religious employers, as well as an open question that applies to all employers.

Maryland State or Local Government

Health benefits

1. I work for a Maryland state or local government which offers health benefits to spouses. Does my employer have to allow me to cover my spouse under the health plan?

Yes. Federal laws do not override state law with respect to plans of state and local governments. And Maryland state and local governments are prohibited from discriminating based on sexual orientation. Thus, a governmental health plan that covers spouses will have to include same-sex spouses.

2. What are the tax consequences if my same-sex spouse is covered under my health plan?

If your spouse is a dependent (lives with you, receives at least one-half of his or her financial support from you, and meets certain other tests), your employer’s contributions to provide spousal health coverage will not be taxable to you. If your employer allows for pretax contributions to pay for spousal health insurance, your contributions to cover a dependent spouse will be pretax.

If your spouse is not a dependent, the cost of your spouse’s coverage will be taxable to you. Any employee-paid premiums for your spouse’s health insurance would then be made on an after-tax basis, even if other health insurance premiums are made on a pretax basis.

3. What rights does my spouse have if he or she loses coverage under my health plan?

If you lose your job or become divorced, your spouse could continue health coverage at his or her own expense for up to twelve months under Maryland’s health care continuation law. Longer coverage might be available if your employer’s plan provides for it. It is unclear whether general state nondiscrimination law could be applied to allow a same-sex spouse the longer continuation period that would apply to an opposite-sex spouse under federal law.

Retirement Plans

4. Is my employer required to provide my spouse with rights under my retirement plan?

Unlike a plan of a private employer, a governmental retirement plan is not required to provide any rights to spouses. Nevertheless, many governmental plans in practice provide such rights. If a particular retirement plan of a Maryland state or local government provides rights to spouses generally, it will need to provide them to same-sex spouses.

5. If I name my same-sex spouse as the beneficiary of my retirement plan, what are the tax consequences?

Taxes on a distribution can be deferred by rolling the money over to another plan. Same-sex spouses are more limited than opposite-sex spouses both in the types of plans to which a rollover can be made and in the time at which distributions must be taken.

Other Governmental Agencies

6. What if I work for state or local government in a state other than Maryland?

Your employee benefits rights will be determined by the law of the state where you work and the terms of the plans that cover you. DC, for example, also recognizes same-sex marriage, so your marriage would be recognized there. However, those states (such as Virginia) that do not recognize same-sex marriage for their own residents are also not required to recognize the same-sex marriages of residents of other states.

7. What if I work for the federal government?

The federal government does not recognize same-sex marriage. Thus, your spouse could not participate in any federal government plan as a spouse.

Religious Organizations

8. Will my same-sex spouse have rights under an employee benefit plan of a religious organization?

That will generally depend entirely on the terms of the plan. Churches and similar religious organizations are exempt from many federal employee benefit laws. They are also exempt from Maryland law prohibiting discrimination in employment based on sexual orientation. Thus, even if you are legally married under Maryland law, a church could provide benefits for opposite-sex spouses and refuse to provide them for you.

All Employers

9. What if my spouse gets sick, and I need to stay home to care for him or her?

Federal rules allowing employees of covered employers to take up to twelve weeks of unpaid leave to care for an ill spouse do not apply to a same-sex spouse. However, unlike in other areas of employee benefits, the provisions of federal law do not preclude state laws from providing greater benefits than federal law.

Maryland law requires that an employee of a covered employer be allowed to use any already earned paid leave to care for an ill spouse. A same-sex spouse would be recognized for purposes of the Maryland law. However, the Maryland law does not by its terms allow you to take unpaid leave to care for an ill spouse.

If your employer provides unpaid leave to an opposite-sex spouse under federal law, must it provide the same rights to a same-sex spouse under Maryland nondiscrimination law? The answer is unclear.