Since the publication of this article, Treasury and the IRS have announced that any legal same-sex marriage will be recognized for federal tax purposes, regardless of whether the couple’s home state recognizes the marriage. See this post. The Department of Labor has also issued final regulations under the Family & Medical Leave Act which recognize a marriage, regardless of the couple’s domicile, if a) it occurred within the United States, and it was valid in the state in which it took place, and b) it occurred outside of the United States, if it was valid in the jurisdiction in which it took place and it could have been entered into in at least one state.
Federal law requires that employer plans determine marital status in a variety of contexts, ranging from requirements that ERISA-covered retirement plans provide spousal death benefits (e.g., a qualified joint and survivor annuity, qualified preretirement survivor annuity, or payment of the participant’s account balance to the spouse) to COBRA (health care continuation) rights in the event of a divorce or separation. In the wake of the Supreme Court’s decision in United States v. Windsor, it is clear that a same-sex married couple must be treated the same as an opposite-sex married couple for these purposes. But when will a same-sex couple be treated as married? Weeks after the Windsor decision, the few federal agencies that have issued guidance have taken wildly disparate approaches.
Let’s start with a same-sex couple named Tom and Ed. In the simplest situation, Tom and Ed live in Massachusetts, and get married in Massachusetts. It is clear that after Windsor, Tom and Ed will be considered married for purposes of all federal laws. But add a little complexity, and the situation rapidly becomes far less clear.
Move to a State That Does Not Recognize Same-Sex Marriage
Suppose that after their marriage, Tom and Ed move to a state that does not recognize their marriage. Are they still married? Here, the agencies start to diverge. Rev. Rul. 1958-66, which deals with common-law marriage, states as follows:
The marital status of individuals as determined under state law is recognized in the administration of the Federal income tax laws. Therefore, if applicable state law recognizes common-law marriages, the status of individuals living in such relationship that the state would treat them as husband and wife is, for Federal income tax purposes, that of husband and wife.
The foregoing position of the Internal Revenue Service with respect to a common-law marriage is equally applicable in the case of taxpayers who enter into a common-law marriage in a state which recognizes such relationship and who later move into a state in which a ceremony is required to initiate the marital relationship.
Under this rule, it would appear that Tom and Ed should still be recognized as married after their move.
However, the Department of Labor’s regulations under the Family and Medical Leave Act (“FMLA“) Sec. 825.122(a) say only:
(a) Spouse. Spouse means a husband or wife as defined or recognized under State law for purposes of marriage in the State where the employee resides, including common law marriage in States where it is recognized.
The regulation contains no exception for situations in which a couple moves from a state in which their marriage is recognized to one in which it is not. And the Department of Labor’s Fact Sheet #28F (issued after Windsor) contains virtually identical language. So are Tom and Ed no longer married for FMLA purposes?
The Wall Street Journal reports that the Labor Department has now issued guidance stating that same-sex married employees can take a leave from their jobs to care for an ill spouse, but has not clarified whether this guidance applies only to couples in states that recognize their marriages, or in all states. However, as to federal employees, the Office Of Personnel Management states as follows:
Benefits coverage is now available to a legally married same-sex spouse of a Federal employee or annuitant, regardless of the employee’s or annuitant’s state of residency.
So in this situation, the IRS revenue ruling suggests that Tom and Ed are still married. The existing Department of Labor regulations on FMLA seem to say that they are not. But the OPM (also interpreting FMLA) says that they are.
And if Tom and Ed are no longer considered married after the move, what is the effect on the employer’s plans? For example, if Ed loses health coverage because he is no longer considered Tom’s husband, is he entitled to COBRA health care continuation rights as if there had been a divorce or separation? If Ed moves after Tom’s death, would he still be entitled to a qualified preretirement survivor annuity if he lived in a state that recognized their marriage before the death?
Marriage Outside of the State of Residence
Our initial example assumed that Tom and Ed lived in Massachusetts. But what if they do instead live in a state that does not have same-sex marriage?
Both Rev. Rul. 1958-66 and the Department of Labor’s FMLA regulations look to the law of the state where the employee resides to determine whether the employee is married. However, this does not necessarily mean that if the employee’s home state does not have same-sex marriage, the home state does not recognize such marriages. The general rule is that even if a state does not permit a particular marriage, it will recognize a marriage of its residents performed in another state unless the marriage violates a “strong public policy” of the home state. Restatement (Second) of Conflicts § 283 (1971).
If Tom and Ed lived in Texas when they got married in Massachusetts, Texas law is clear. Texas Family Code Sec. 6.204 states that:
(b) A marriage between persons of the same sex or a civil union is contrary to the public policy of this state and is void in this state.
(c) The state or an agency or political subdivision of the state may not give effect to a:
(1) public act, record, or judicial proceeding that creates, recognizes, or validates a marriage between persons of the same sex or a civil union in this state or in any other jurisdiction; or
(2) right or claim to any legal protection, benefit, or responsibility asserted as a result of a marriage between persons of the same sex or a civil union in this state or in any other jurisdiction.
Thus, in this situation, Tom and Ed would presumably not be treated as married under either Rev. Rul. 1958-66 and the Department of Labor’s FMLA regulations, although they would be treated as married under the OPM announcement.
However, suppose that Tom and Ed lived in Illinois instead of Texas. Illinois itself has only civil unions, not same-sex marriage. However, given that Illinois recognizes out-of-state same-sex marriages as civil unions, it is hard to say that Illinois has a “strong public policy” against them. An Eastern District of Pennsylvania decision has now treated an Illinois couple as married for purposes of a pension plan’s preretirement survivor annuity provisions, apparently based on just such an argument. Thus, even the law of a couple’s home state is the determining factor, an employer may have to look not only to whether the state permits same-sex marriage, but to whether it has a strong public policy against recognizing out-of-state same-sex marriages.
Move to a State That Does Recognize Same-Sex Marriage
Suppose that although Tom and Ed were married in Massachusetts while residents of Texas, they move to Connecticut two years after their marriage. Less than a year after the move, Tom (who was the employee) dies and Ed applies for a preretirement survivor annuity. The plan provides that a preretirement survivor annuity is available only if the employee and spouse have been married for at least one year. Does Ed qualify for the benefit?
In this case (and assuming the law of the employee’s domicile is the relevant test), the plan would not have treated Tom and Ed as married a year before the death. Nevertheless, Connecticut (the domicile on the date of death) would treat Tom and Ed as having been married for more than one year on the date of death. Which measurement should apply?
Neither the IRS nor the Department of Labor has issued any guidance that would be helpful on this issue. In a somewhat analogous situation, the Social Security Administration initially issued, but has now removed, guidance on providing spousal benefits. The guidance would not have allow spousal benefits to be provided to Ed if the couple remained in Texas. However, if Ed filed for spousal benefits while still in Texas, but moved to Connecticut while the claim was pending, the date of the filing in Texas would have been used to determine the month of entitlement. If the IRS were to follow an analogous approach, Ed would be entitled to the qualified preretirement survivor annuity.
Currrently, there is little guidance on when a same-sex couple will be considered married for employee benefits purposes, and the guidance that exists takes conflicting positions, even when interpreting the same federal statutes. There is a clear need for prompt guidance, coordinated among the various agencies. Moreover, unless the guidance takes the OPM approach (treating a marriage as valid if it was recognized by the state performed, regardless of the laws of the state of residence), employers can expect to have to undertake determinations of marital status far more complex than just determining whether the employee’s current state of residence permits same-sex marriage.