DOMA Ruling Saves the Day For Just Some

Last week, section 3 of the Defense of Marriage Act (DOMA) was deemed unconstitutional by the Supreme Court. It was a turning point in how the United States government considers the relationships of married same-sex couples for federal programs linked to being married.

This ruling will result in the recognition of some same-sex couples as being married both on the state and federal level, entitling them to the full slate of 1,138 federal spousal benefits that are afforded to their married heterosexual counterparts.

However, over this past week, same-sex couples have become concerned with this word, “some,” wondering to whom this marriage status applies and, almost more importantly, who it excludes. Section 2 of DOMA still exists, empowering each state to make its own legislative decision regarding whether or not a couple’s marriage is valid and what stipulations surround that status.

Today, 13 states (and the District of Columbia) legally support gay marriage, and 36 states have laws or constitutional amendments defining marriage as the union of one man and one woman (regardless of whether or not the state permits civil unions or domestic partnerships). New Mexico has no state legislation favoring either side. Although the fine details are complicated, the underlying rule delineating the ultimate acceptance of marriage and the distribution of benefits is fairly cut and dry and is based on the primary state of residence of the couple.

Couples that live in a state in which gay marriage is legal will be considered married both on the state and federal level and will be entitled to all spousal benefits. These benefits will take effect on Monday, July 22 (25 days after the ruling).

However, just as the 13 states and D.C. guarantee marriage recognition, the others that oppose or have not legalized gay marriage technically support the denial of that recognition, at least for the time being. The reason for this is that most of the federal agencies linked to providing spousal benefits, such as the IRS, Social Security and the Department of Labor, base eligibility on the couple’s present primary state of residence.

The Department of Immigration is the only major federal department that focuses on the state of celebration (the state in which the couple was married) as the determining factor in distributing benefits. Therefore, a couple whose main residence is in one of the 37 opposing states should expect that spousal benefits, excepting perhaps those offered through the Department of Immigration, will not be allowed at this time.

Two of the most talked-about benefits are the availability of non-taxable health insurance benefits under a spouse’s employer’s health plan and the unlimited marital deduction for gift and estate taxes. Under DOMA, tax-advantaged employment benefits were not available to same-sex spouses unless the spouse qualified as a “tax dependent” of the employee.

Now, in the applicable states, when an employer provides group health insurance and premium contributions for its employees and their families, the value of those benefits is not subject to federal income tax. In addition, the gift tax marital exemption and the estate tax marital deduction will also apply to married same-sex couples living in one of the 13 states.

Additional benefits to be offered to qualifying same-sex couples include:

• Social Security spousal retirement benefits and survivor benefits are now available

• The option for same-sex couples to file their federal income taxes jointly

• The ability for bi-national couples to sponsor partners for U.S. citizenship

• ERISA Benefits: spousal provisions in employee benefit plans and pension accounts

• Family Medical Leave Act eligibility

• COBRA continuation coverage for same-sex spouses and their children

• Federal employees’ same-sex spouses can now obtain health insurance and retirement benefits

In response to the ruling on June 27, President Barack Obama has called for the federal benefits afforded to heterosexual couples to be extended to all U.S. married couples, regardless of where they live, but this will take some further action before it becomes a reality. It will not be easy to extend federal rights and benefits to same-sex couples while the states, not the federal government, dictate who is married.

Todd Sandstrom is a plan design specialist with Longfellow Benefits, a Boston firm that offers employee and executive benefits. An expert in life insurance and health insurance and nonqualified executive benefits, he can be reached at tsandstrom@lf-ben.com.