Gay Marriage and Human Resources and Government & Economic Development and Government and Public policy and Workplace Issues

Firms unravel implications of same-sex court ruling

July 6, 2013

Judges have spoken and people have celebrated, but human resources departments remain confounded on what will change for their companies with the U.S. Supreme Court’s ruling on the Defense of Marriage Act.

Local companies and their attorneys are sifting through changes to tax laws, benefit laws and family laws to figure out what benefits, if any, they need to offer to employees’ same-sex spouses.

In its 5-4 decision on June 26, the U.S. Supreme Court eliminated a section of DOMA that, in effect, denied more than 1,000 federal benefits for married same-sex couples. States still get to decide whether a couple is legally married.

Indiana does not legally recognize same-sex marriage, and state law does not require businesses to offer benefits to gay or lesbian workers’ spouses.

But Indiana companies with employees in others states—in particular, those that recognize same-sex marriages, civil unions or domestic partnerships—are trying to figure out how they need to adjust their policies. Benefits, such as insurance, change depending on whether someone is considered legally married.

“The biggest issues that our customers are facing are those with employees in multiple states,” said Katy Stowers, general counsel for benefits broker FirstPerson Inc. in Indianapolis. “Can they still define marriage based on what they chose? Or is it based on where someone works? Or where they live? What we’ve got is a potentially sweeping change, but we’re not exactly sure where the impact will be felt and what sorts of actions will be required.”

Christopher Sears, a partner at law firm Ice Miller LLP who specializes in employee benefits, said companies need the government to address several issues including potential tax law changes, differences in laws across state lines and what legally constitutes a marriage or union.

Stowers and Sears are advising clients to wait until the federal government issues advisories.

“It’s premature to go and do anything drastic,” Sears said. “We’re going to have to have guidance. We need some kind of uniform application for this decision.”

Tax changes

Some of Indiana’s largest employers—Eli Lilly and Co., WellPoint Inc., Simon Property Group and Cummins Inc.—already offer domestic partner benefits.

The companies don’t have to worry about implementing new plans for workers, but tax law will change for those benefits.

Kueterman Kueterman

Previously, the IRS did not treat benefits for domestic partners the same as in heterosexual marriages. People who had health insurance for their same-sex spouses paid income taxes on the benefits, while heterosexual co-workers did not.

Lilly spokesman Greg Kueterman said Lilly has determined the IRS won’t tax benefits for employees’ spouses in New Jersey, where the state recognizes civil unions. In Indiana, the benefits will be taxable.

Cummins spokesman Jon Mills said the company is still analyzing the court ruling and how it will affect the company and its employees. Cummins has operations in New York, Massachusetts and Washington, D.C., all of which allow same-sex marriage, while six other states where it operates don’t.

Sears, of Ice Miller, said the workers who paid extra taxes on their partners’ benefits could receive refunds for as far back as three years.

State differences

The state-to-state differences create one of the biggest conundrums.

The Supreme Court, as part of its ruling, used the “states’ rights” reasoning, saying it was up to them to define marriage.

That could create problems for someone who lives in Illinois, which recognizes same-sex civil unions, and works in Indiana.

In that case, employment law attorney John Haskin asked, is an Indiana company legally required to treat its worker as married and offer the same benefits?

Big companies could find it even trickier if they offer benefits to same-sex couples in one state, where it’s required to do so, but not in another state, continued Haskin, a former civil rights attorney who founded Haskin and Associates in Indianapolis.

Or can an employer transfer an employee from a same-sex marriage state to one with a ban and strip away the spouse’s benefits, he pondered.

“If they did, they’re looking at litigation,” he said.

Indiana only recognizes marriages between one man and one women, and Republican leaders including Gov. Mike Pence have made clear they don’t plan to change course.

Within hours of the June 26 Supreme Court ruling, Pence’s office released a statement saying he was “disappointed” with the decision but was “grateful” the court recognized the state’s sovereignty.

He called for a vote in 2014 on adding a ban on same-sex marriage to the state’s constitution, a move some employers are already pushing against.

Haskin thinks the state-by-state differences in marriage definitions set up too many pitfalls and federal law will be hard to enforce, setting the stage for eventual uniform recognition of same-sex marriages.

“It has to be uniform for all states irrespective of what their state law is for same-sex unions,” he said.•

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