California's Gay Marriage: Preempted?
Since I have previously addressed the issues of same-sex marriage and domestic partnerships in this blog, I would totally remiss not to provide some commentary on the recent decision of the California Supreme Court that resulted in the recognition of "gay marriage" in that state. California already had a very strong domestic partnership law in place, but for plan administrators, this change to "marriage" might cause some problems that have to be addressed. Not the least of which is preemption of federal law.
First, let's review retirement plan concerns. Qualified retirement plans are generally governed by ERISA and various corresponding tax regulations. All of these regulations are subject to the impact of the federal Defense of Marriage Act. The net effect is that when considering the term "spouse" in your qualified plans, it does count include a same-sex partner, married or otherwise. So any provision in a plan that provide for benefit to a "spouse" would not apply to a same-sex spouse even when married under state law. For example, consider a defined benefit plan distribution that requires spousal consent for distribution. A partner in a same-sex marriage is not required to obtain spousal consent because in the eyes of the plan, he or she has no spouse. Similarly, any spousal rights that may accrue as a result of the death of the participant under the terms of the plan would not accrue to the same-sex partner.
Second, when we look at welfare plans, all of the dependent coverage definitions in the plan referring to "spouse" would not automatically include the same-sex spouse. Certainly a plan can add coverage for same-sex partners, but doing so does not grant them the federal protections of things like COBRA (which would not apply since the dependent would not be recognized as a spouse under federal law). Cafeteria plans cannot provide benefits to same-sex partners, which (as we have discussed here previously) means that employees cannot pay that portion of their health coverage attributable to same-sex partners with pre-tax dollars.
This is not to say that plans, retirement or welfare, cannot be amended or designed to recognize and benefit same-sex spouse. What is does mean, though, is that plan administrator have two particular concerns. One, if the plan administrator does decide to recognize same-sex partners as spouses, it has to be very careful to administer benefits in accordance with federal law. Second, the plan administrator has to be very careful to make sure that it is not providing benefits improperly because of lack of diligence. Plan administrators should be very careful about enrollment of participants, particularly in states recognizing gay marriage and domestic-partners. Participants have to be advised of the distinction between state and federal law and how benefits may or may not be administered for their same-sex partners.
I leave you with this scenario: a plan participant in a retirement plan dies and the plan distributes the retirement benefit to the same-sex spouse believing the same-sex partner is the "spouse." The participant's children from a prior marriage later claim they were the proper beneficiaries because there was no "spouse" at the time of death (because same-sex spouses are not recognized under federal law). The plan is sued by the children for the benefits improperly paid. Sound far fetched? I think you will find that this case is already out there and I hope it is not against your plan.
