Defense of Marriage Act (DOMA)

On June 26, 2013, the U.S. Supreme Court issued its ruling on two highly anticipated cases related to same-sex marriage:

  • Hollingsworth v. Perry: challenging the constitutionality of California's ban on marriage between same-sex couples (Proposition 8)
  • United States v. Windsor: challenging the constitutionality of the federal Defense of Marriage Act (DOMA). Passed in 1996, DOMA defines a marriage as a union between a man and a woman.

The Court found DOMA to be unconstitutional, giving legally married same-sex couples equal treatment under the law. We expect the Court’s ruling to have a significant impact on employers regarding payroll taxes, health insurance, FSA/Section 125, and employment regulation/FMLA. Here are a few of the anticipated impacts based on the Supreme Court’s ruling:

Payroll Tax Changes

Pre-tax benefits that were not previously offered to same-sex partners, such as health insurance premiums and FSA/Sec 125 participation, will become eligible as a pre-tax benefit. Not only will this impact the employees’ taxable income, it will directly impact an employer’s tax liability, which is determined by its employees’ taxable incomes. It’s possible additional administrative burdens could be placed on employers as they may become required to differentiate benefits provided to a “traditional” couple as opposed to a same-sex couple.

Family and Medical Leave Act (FMLA)

FMLA usage could see a significant increase in those states which recognize same-sex marriages. FMLA provides up to 12 weeks of unpaid leave to care for an immediate family member with a serious health condition, including a spouse.

In the Hollingsworth v. Perry case, the Supreme Court ruled that the sponsors of Proposition 8 in California didn’t have the legal standing to appeal the 2010 district court ruling that found the ballot measure unconstitutional. The Court’s decision means that same sex marriages can resume once the U.S. 9th Circuit Court of Appeals lifts its stay, which it did on Friday, June 28, 2013.