New York's Same-Sex Marriage Law: The Employee Benefits Impact, Part I

July 10, 2011

On June 24, 2011, Governor Cuomo signed the Marriage Equality Act  which will allow same-sex couples to be married in New York and to have, with certain exceptions, the same legal protections available to opposite-sex couples married in New York. The effective date of the Legislation is July 24, 2011, giving New York employers only a month to comply. For that reason, New York employers should immediately take the following steps to ensure their employee benefit plans, programs and policies (collectively, “Benefit Plans”) will comply with the Legislation:

• review the requirements imposed by the Legislation to determine how they will affect your existing Benefit Plans;
• determine what, if any, changes must be made to your Benefit Plans
• Begin implementation of necessary changes by preparing any necessary amendments to the affected Benefit Plans, coordinating with any applicable insurer or third party administrator about the changes being made, obtaining any necessary approval from the applicable Board of Directors or Board of Trustees, and preparing any necessary summary of material modification(s) or revised summary plan description(s);
• continue implementation by revising all other materials describing employee benefits (benefit summaries, benefit web pages, benefit forms, employee handbooks, etc.); and
• review any domestic partner policy, and any other employer policy that might be affected by the Legislation, (including an analysis of whether any changes are needed to help address potential discrimination claims, such as those that might be brought by opposite-sex domestic partners in certain circumstances).

What Are the Major Changes Made By the Legislation?

The major changes made by the Legislation include the following:

• no application for a marriage license in New York State will be denied on the ground that the parties are of the same sex;
• a marriage that is otherwise valid will be valid regardless of whether the parties to the marriage are of the same sex or different sex; and
• no government treatment or legal status, effect, right, benefit, privilege, protection or responsibility relating to marriage in New York State will differ based on the parties to the marriage being or having been of the same sex rather than a different sex.

The law contains special compliance exceptions for religious entities, benevolent organizations, and not-for-profit corporations that are operated, supervised or controlled by religious entities as defined in the Legislation
 

How Does the Legislation Affect Retirement Plans?

Spouses of participants in certain types of retirement plans that are subject to the requirements of the Internal Revenue Code (“Code”) and the Employee Retirement Income Security Act (“ERISA”) are entitled to special protections. These protections include the right to receive a qualified joint and survivor annuity or a qualified pre-retirement survivor annuity, if specified requirements are satisfied. With the enactment of the Legislation, an issue arises as to whether these spousal protections must be provided to a same-sex spouse of a New York participant in such retirement plans. For the reasons described below, the answer currently is no.
The Federal Defense of Marriage Act (“DOMA”) provides that, for purposes of all federal laws, the term “spouse” only refers to a person of the opposite sex who is a husband or wife. Under DOMA, the term “spouse” for Code and ERISA purposes will not include a same-sex spouse. In addition, ERISA generally preempts state laws, other than insurance laws and certain other laws.

Retirement plans that are subject to the requirements of the Code and ERISA, therefore, will not be subject to the new requirements imposed by the Legislation. However, employers still should verify that any definition of spouse in such plans will not inadvertently include same-sex spouses in a manner that creates issues under the Code or ERISA. Such retirement plans are required to be administered in accordance with their written terms, and employers with such plans will want to make sure that the change in the definition of spouse in the Legislation will not result in any inconsistency between how spouse is defined in the plan and how that definition is administered.

What Impact Does the Legislation Have on Insured Health Plans and Other Insured Welfare Benefit Plans?

In 2008, the New York State Insurance Department (“Insurance Department”) issued a Circular Letter and an opinion directing that same-sex spouses legally married outside of New York State must be treated the same as opposite-sex spouses for purposes of insured health, group long-term disability, group short-term disability, and group term life insurance plans that are subject to the requirements of the New York Insurance Law (collectively, “Insured Plans”). Effective July 24, 2011, same-sex spouses who are married in New York State will have the same rights under Insured Plans that were provided in 2008 to same-sex married spouses legally married outside of New York State.

Employers with Insured Plans, therefore, should review the language in their plan documents, summary plan descriptions, and insurance policies to see whether the definition of spouse will need any revision to include same-sex spouses who are married in New York State.

In tomorrow’s post, Part II, the Marriage Equality Act’s impact on self-insured health and welfare benefit plans, on non-ERISA plans, and on tax treatment.