(Article originally published in Business New Hampshire Magazine, August 2009)
The New Hampshire state legislature has passed, and the Governor on June 4, 2009 signed, legislation legalizing same sex marriage in New Hampshire. The law is effective January 1, 2010. In passing this legislation, New Hampshire becomes the sixth state to recognize marriages between members of the same gender.
The law affirms the right of religious clergy or others authorized to perform marriages to decline to do so if it would violate sincerely held religious beliefs. Efforts to provide similar protections to those who personally object to same sex marriages such as photographers, florists and other service providers were not successful, a logical result given the fact that New Hampshire has long recognized sexual orientation as a protected class under state anti-discrimination laws.
New Hampshire has recognized civil unions since January 1, 2008, but they will no longer be performed after the first of the year. On January 1, 2011 all civil unions will automatically be converted to marriages. Parties who entered into civil unions in other states will be considered married in New Hampshire.
Employers who have already amended their employee handbooks and personnel policies to address domestic partnerships and civil unions are likely to have only minor changes to make. Although employees who enter into same sex marriages are now afforded greater protection and benefits under state law, there remains a conflict with federal law.
Federal Laws that Govern Benefit Plans
Federal law provides significant limitations on benefits for individuals who are not federal tax dependants or part of a traditional family. In 1996 Congress passed the Defense of Marriage Act (“DOMA”) for the purpose of clarifying certain definitions used in federal laws. For purposes of all federal laws, DOMA defines marriage as a legal union between one man and one woman and a spouse as only a person of the opposite sex who is a husband or wife. When the terms “marriage” or “spouse” are used in federal statutes, such terms refer only to traditional married couples and not same gender spouses.
The Employee Retirement Income Security Act of 1974 (“ERISA”) is a federal law which governs retirement plans such as 401(k)s, pension plans and welfare plans such as medical, dental, long-term disability and death benefit plans. ERISA was enacted in part to provide for uniform benefit laws across the country. ERISA provides for this uniformity by specifically superseding or “preempting” any state law or regulation that relates to an employee benefit plan. ERISA does not supersede state insurance laws because prior to the passage of ERISA, states had traditionally regulated insurance.
Because of ERISA preemption and the DOMA, same gender spouses will not be entitled to the same rights and benefits under private employer retirement plans as traditional spouses. In the event of the employee’s death prior to retirement, same gender spouses will not receive death benefits from traditional pension plans. Most pension plans will however, allow an employee at retirement to elect a joint annuity that will pay benefits to the same spouse after the employee’s death. The same gender spouse will have to be specifically named as the employee’s beneficiary in order to receive any death benefit in a 401(k) or other defined contribution plan. When a gay marriage is dissolved, the employee’s retirement benefits cannot be divided between the employee and the same gender spouse in the same manner as in a traditional marriage. Employers will need to carefully review and revise their retirement plan documents and plan descriptions to reflect the newest change in New Hampshire law.
Employers experienced with health insurance benefits for civil union couples will find the same rules apply to same gender spouses. As a result of the insurance exception to ERISA discussed above, the law requires employers to offer identical medical and dental coverage to civil union couples, same gender couples and traditional couples. Employers that provide self-insured medical, dental and other benefits to employees are not subject to the same state insurance laws because of ERISA preemption. Although not required to do so, most employers who self-insure do provide the same medical and dental coverage to all employees and do not differentiate between traditional marriages and other relationships. An employer providing benefits on a self-insured basis needs to clearly address this coverage issue in all plan documents, benefit descriptions and employee communication materials.
Health Care Continuation Coverage
Both the New Hampshire and federal COBRA laws permit an employee who terminates employment to continue health coverage for up to 18 months. Certain other events such as a divorce also trigger continuation rights. Although same gender spouses are not entitled to continuation coverage under federal law, New Hampshire insurance law requires continuation coverage if medical and dental coverage is provided to employees on a fully insured basis. Employers providing medical and dental insurance on a self-insured basis are not required to provide continuation coverage but most do so on a voluntary basis.
Tax Treatment of Group Health Benefits
Although same gender couples will likely be entitled to group health benefits, the employee will not be entitled to the same favorable tax treatment with respect to employer-provided health coverage as opposite sex married employees. Just as with civil union couples, if the same gender spouse cannot qualify as a federal tax dependent of the employee, the employee will be taxed on the value of the spouse’s coverage. In such a case, the employer must reports as income to the employee the fair market value of the medical coverage provided by the employer less the amount paid by the employer for that coverage. The amount included as wages is subject to employer withholding and employment taxes. There are similar imputed income rules for group life insurance and other benefits.
State and Federal Leave Laws
The impact of the new law on employee leave depends on whether the leave at issue is required by federal law, mandated by state law or provided voluntarily by the employer. Employers with 50 or more employees are required by the federal Family Medical Leave Act ("FMLA") to provide unpaid leave to an employee to care for the employee's spouse due to a serious illness or as the result of an injury or illness sustained during service in the armed forces. Because same sex marriages are not recognized under federal law, an employer is not required to provide FMLA leave to employees who need to care for their same gender spouses. Employers of course have the option of providing similar leave to employees faced with serious family illness or injury under their general leave policies as opposed to the FMLA.
Crime Victim Leave, in comparison, is required under state law. The statute provides that victims of a crime have the right to leave work in order to participate in the prosecution of the alleged criminal. A victim is broadly defined and also includes the immediate family of any victim who is a minor or who is incompetent or the immediate family of a homicide victim. Same sex spouses must be treated as any other spouse under the Crime Victim Leave Act. It is also likely that the minor or disabled child of a same gender spouse would fall within the definition of victim.
In addition, all forms of voluntary leave such as bereavement leave, maternity, paternity or adoption leave and personal or sick leave which allow an employee to miss time from work to care for an ill or disabled spouse or child or family member of a spouse now clearly apply to same gender spouses. A company who fails to treat same gender spouses the same as traditional spouses in these scenarios could run afoul of New Hampshire’s law against discrimination which prohibits discrimination not only on the basis of sexual orientation but also on the basis of marital status. Employers should once again review their handbooks to determine whether policies covering such issues as Personal Relationships and anti-nepotism need to be reworded to accommodate same gender marriages.
John E. Rich, Jr. is a Director at McLane, Graf, Raulerson & Middleton, Professional Association who specializes in employee benefits, pension, ERISA and tax-related matters. He can be contacted directly at (603) 628-1438, or by email at [email protected]. Charla Bizios Stevens is a Director in the Employment Law Practice Group at McLane, Graf, Raulerson & Middleton, Professional Association. She can be contacted directly at (603) 628-1363, or by email at [email protected].