In a highly important move, the Department of Labor released guidance on how ERISA-governed employee benefit plans will treat same-sex marriages following the Supreme Court’s overruling of DOMA’s definition of marriage as limited to one man and one woman. ERISA-governed benefit plans include private employer benefit plans like 401k plans, defined benefit pensions and health insurance plans.
The guidance is significant because it affects how spousal benefits extend in retirement savings plans and health care. The guidance asserts administrators shall treat same-sex couples as married if the marriage is valid in the state where celebrated.
Why the new DOL guidance matters
The Employee Retirement Income Security Act (ERISA) governs most private employer benefit plans. It is a federal law and specifically overrules state law on many issues. When the federal government passed DOMA, it defined what ERISA considers “marriage” for covered plans. As a result, ERISA-governed plans could provide some domestic partner coverage in health care plans; but all rights given to spouses were not available to same-sex spouses as same-sex marriage began to legalized across states. Without DOMA’s limited definition, there was no longer a clear rule for how ERISA plans would defined a “spouse”.
Spousal benefits under ERISA plans are significant. Spouses enjoy broad coverage opportunities under health insurance plans, while many employers do not offer domestic partner coverage. All defined contribution retirement plans (like 401ks) and defined benefit pensions grant spouses an interest in a survivor benefit in the plan that is not available to anybody else. Additionally, in the case of divorce, spouses may receive a division of retirement benefits through a qualified domestic relations order.
What the new DOL guidance changes
The new guidance sets the standard for valid marriages for ERISA purposes based on the laws of the state that granted the marriage. Or in other words if the marriage was legal where it occurred then it is valid to the plan.
That is an important clarification from the DOL because it avoids situations where same-sex couples are married in some states but not others and there is an unsettled tension between the federal constitutional duties of those states not recognizing same-sex marriage (like Texas) and the constitution or laws of those states. At first glance the DOL’s position may seem like they are punting on the issue but the effect of the DOL’s position is that they are recognizing all legally created marriages, regardless of the position of those states that do not recognize same-sex marriages.
Aside from the legal issues, it would make little sense for the DOL to put the validity of the marriage in the hands of the state where the same-sex married employee is domiciled. As the guidance points out, it would create strange situations where employers with employees in multiple states could have employees who are married in some work sites but not others and accrue spousal benefits in some states but not others. The confusion and administrative problems would make that position unnecessarily burdensome for both plan administrators and employees.
What it means for workers in Texas
For all same-sex married employees, it means ERISA applies to plan rules equally to all valid marriages. Even if Texas’ government will not recognize the marriage. However, there is a huge question regarding QDROs and the division of retirement benefits. Under today’s guidance, an ERISA-governed plan must accept a DRO to segregate community property in the plan; but not all Texas family courts will dissolve a same-sex marriage.
Some Texas courts have dissolved gay marriages; but the Attorney General challenged the validity of these divorces. So far at least one divorce out of Dallas has fallen victim to the AG’s challenge. Without the divorce there is no division of community property and no QDRO. It will be interesting to see how the remaining challenges will play out, especially under the current guidance.