The First Circuit’s DOMA Decision: What It Means for Employers

On May 31, 2012 the U.S. Court of Appeals for the First Circuit, in Massachusetts v. United States Department of Health and Human Services, declared Section 3 of the Defense of Marriage Act (DOMA) unconstitutional. Section 3 defines marriage for purposes of applying all federal statutes as “a legal union between one man and one woman as husband and wife.” The First Circuit held that this definition of marriage violates the Equal Protection Clause by denying federal benefits to same-sex couples lawfully married under state law. The Court, however, stayed enforcement of its decision pending appeal.

As a reminder, DOMA does not formally invalidate same-sex marriages in the states that legally recognize them, but it does have several consequences for same-sex married couples under federal law. For example, same-sex married couples may not file joint federal income tax returns, enjoy the preferential tax treatment afforded employer-sponsored spousal health insurance benefits, or receive health insurance as the spouse of a federal employee. So what does this decision mean to employers and sponsors of employee benefit plans?

For now, the decision will not have much impact on employee benefit plans because the Court stayed enforcement of its ruling. This means that DOMA is still in effect and will continue to operate as valid law until this case is either upheld or denied review by the U.S. Supreme Court. (Most commentators think, and we agree, that the Supreme Court is likely take up the case.) So at this point, employers and plan sponsors need not make any changes to their employee benefit plans. Employers should monitor developments in the case, however, as a decision upholding the First Circuit ruling (or no decision at all) will likely have significant ramifications for employees and employers alike.

If DOMA were invalidated, the primary impacts would be centered around benefits conditioned on obtaining a legally recognized marriage. Thus, depending on the terms of the decision, a nullification of DOMA might only affect employers and individuals in the states (including, at present day, Massachusetts and New Hampshire in the First Circuit) that legally recognize same-sex marriage. Same-sex couples residing in states that do not legally recognize same-sex marriage might remain ineligible under federal law for marriage-based benefits.

In those states that do legally recognize same-sex marriage, the invalidation of DOMA would mean that same-sex couples would qualify as spouses for the purposes of federal tax law, ERISA, and related federal mandates (COBRA, HIPAA, etc.) for group health plans, or for purposes of retirement plan rules protecting federally recognized spouses. Therefore, if the Supreme Court affirms the First Circuit decision and removes DOMA from the books, employers in those states will want to review their employee benefit plans as they relate to spousal benefits.

Thanks to Colin Hay, a summer Associate at Verrill Dana, for his efforts in producing this post. Colin will enter his third year of law school in the fall and, in the meantime, is enjoying his summer in Portland.