Following the Supreme Court’s June 26, 2013 decision in United States v. Windsor, declaring the Defense of Marriage Act (“DOMA”) unconstitutional, employers have been rethinking employee benefits programs under expanded definitions of “spouse” and “dependent”.
Although Windsor has employers thinking more broadly, it does not itself require employers to provide same-sex partner health insurance benefits. IRS guidance, following Windsor, however, allows employers to offer certain health care programs that result in federal tax benefits to employees. In addition, Windsor aside, local ordinances may require employers to treat employees equally when administering health insurance benefits, depending upon the type of coverage that the employer offers its employees. Here is a summary of legally defensible post-Windsor employee health care options in Pennsylvania.
Windsor gives employers greater freedom to create an equal workplace.
For the purpose of federal taxes, the Department of Treasury recognizes lawful same-sex marriage, regardless of a taxpayer’s state of residence. Take, for example, a same-sex couple residing in Pennsylvania, a state that does not allow same-sex marriage, who lawfully marries in New York. That couple would be recognized as lawfully married, for purposes of federal taxes, even though they live in Pennsylvania. Thus, the most direct way that Windsor impacts employee health benefits is by allowing employers in Pennsylvania to extend cafeteria plan coverage (which is governed by Federal Law) to same-sex partners who were lawfully married. However, because Pennsylvania does not recognize same-sex marriage, Windsor does not require that employers to offer equal health care plans to same-sex partners when the employer’s coverage only extends to a “husband” and “wife”.
Employers may allow same-sex partners to participate in cafeteria plans.
Cafeteria plans offer options for employees to contribute their income, on a pretax basis, to save for the purpose of qualifying health care for participating employees and their families. Also, because the income contributed to cafeteria plans is pre-tax, cafeteria plans reduce participating employees’ taxable income. Although Pennsylvania does not recognize same-sex marriage, Windsor permits employers to allow employees who were already married as of the date of Windsor to make an election change, electing to change the employees’ marital status because of the Windsor decision.
Additionally, a mid-year election change to reflect a marriage occurring after Windsor is also permissible. This means that the money saved through the cafeteria plan may be used for the health care of a same-sex partner. Please note that remaining unchanged by Windsor, gender reassignment surgery is usually not covered by cafeteria plans.
Employers may allow employees to be reimbursed from a health care FSA for same-sex partners.
A type of cafeteria plan coverage, Flexible Spending Accounts (or “FSA”,) allow employees to, on a pre-tax basis, set aside income to cover out-of-pocket medical expenses, such as co-pays and deductibles. Following Windsor, the IRS released a notice that allows an employee to be reimbursed from his or her health care FSA for expenses incurred by a same-sex spouse during the 2013 plan year, even before the date of the Windsor Decision (but no earlier than the date of the marriage). The IRS guidance also states that a same-sex spouse may be treated as covered by the FSA, even if the participant initially elected coverage under a self-only FSA. These rules also apply to dependent care and adoption assistance FSAs.
Windsor does not require workplace equality in Pennsylvania, but a local ordinance might.
Notwithstanding Windsor’s deference to states’ definition of “marriage”, local ordinances may require employers to offer equal health insurance benefits. Local ordinances, particularly in Allentown, Easton, and Bethlehem, prohibit discrimination in employment benefits and decisions. If, for example, a covered employer offers family benefits to domestic partners, those benefits cannot be withheld from otherwise qualifying same-sex partners, just as they could not be withheld from otherwise qualifying opposite-sex partners. If, however, an employer offers family health insurance benefits to married partners only, then, in Pennsylvania, same-sex partners are lawfully excluded, even if they were lawfully married.
Options for health care plans in a post-Windsor workplace in Pennsylvania
- Offer family coverage to married employees and their partners, as defined by Pennsylvania law, and to domestic partners, both same-sex and opposite-sex.
- Offer family coverage to married employees and their partners only, as denied by PA Law, keeping in mind that this must include same-sex marriages if/when Pennsylvania allows same-sex marriage, and not offer any FSA coverage.
- Offer family coverage to married employees and their partners, as defined by Pennsylvania law, only and allow cafeteria plans, such as FSA coverage, for domestic partner family coverage.
The Eastern Pennsylvania Employment Log (EPELog) and heARTbeat are publications of KingSpry. They are meant to be informational and do not constitute legal advice.
