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Stewart: Defense of Marriage Act ruling relevant to employers

Published: Sunday, Jan. 13, 2013 5:30 a.m. CDT

The Defense of Marriage Act (DOMA) will be reviewed by the Supreme Court in its upcoming session, with a decision likely to be issued around June of this year. Many pundits are predicting that DOMA will be overturned, at least in part. This article will address what provisions will likely be reviewed, and what impact a decision to overturn DOMA would have on Illinois employers.

DOMA, in a very general sense, is legislation that: (a) recognizes marriage under federal law to only be between one man and one woman (Section 3); and (b) permits states to not have to recognize same-sex marriages entered into in another state (Section 2).

Section 3 is the reason that same-sex civil union partners in Illinois are not eligible, for example, for federal tax status and exemptions as a married couple, while married couples and opposite-sex civil union partners in Illinois (yes, civil unions are available to opposite sex partners) are considered married under federal law and thus eligible for federal benefits.

Under Illinois law by contrast, a civil union is synonymous with marriage, and any civil union partner is considered a spouse for all non-federal employment purposes.

While either or both sections of DOMA could be invalidated, Section 3 is most pertinent to employers because tax treatment and benefits offered to same-sex civil union partners could change overnight.

Here is a non-exclusive list of some changes relevant to employers and employment policies if Section 3 is invalidated:

• Family Medical Leave Act (FMLA). Currently, a same-sex civil union partner is not a recognized family member for employees to take FMLA time to care for in the event of serious medical illness or other qualifying event. While a same-sex civil union partner could currently be a qualified dependent to allow FMLA coverage on a different basis, if Section 3 is overturned then those partners would be recognized family members for purposes of an employee taking FMLA leave.

• Tax-qualified plans with survivor annuities. Some tax-qualified plans are federally mandated to provide an annuity to the employee’s surviving spouse. Such plans would have to provide the survivor annuity to same-sex civil union partners.

• Federal income tax status. Whereas same-sex civil union partners in Illinois are currently recognized under the state tax code as married, the same parties to the union are not considered married under the federal tax code. Updates to W-2 forms and related documents would be needed if DOMA, specifically Section 3, is invalidated.

• 401(k) and similar IRS plan hardship withdrawals. Much like the FMLA restrictions, current federal law recognizes certain hardship events to a spouse that would allow an employee to withdraw money from a qualified plan without suffering the regular early withdrawal penalty. The same hardship recognition would apply to same-sex civil union partners.

Because Illinois already has laws forbidding discrimination on the basis of sexual orientation in the workplace, many ERISA-based variables at play in other states, such as excluding a same-sex spouse from an employee’s health-care insurance, will not be at issue for Illinois employers.

The bottom line for Illinois employers is that if Section 3 is overturned, then the status of employees in same-sex civil unions will mirror the status of married employees for all federally-based employment purposes.

Regardless of individual beliefs or the eventual outcome, employers should stay tuned for the Supreme Court’s decision on DOMA later this year and be prepared to make any necessary changes to internal policies when the decision is released.

• Brad Stewart is an attorney with Zukowski, Rogers, Flood & McArdle in Crystal Lake. Stewart was valedictorian of his law school class and devotes most of his practice to corporate and local government law. He can be reached at bstewart@zrfmlaw.com.

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