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Who is an employee’s “spouse”? Thanks to recent developments in the legal status of same-sex marriages, that question is no longer a simple one for human resources departments � or for the lawyers who advise them. The biggest factor complicating this definition is the Massachusetts Supreme Judicial Court’s November decision legalizing same-sex marriage. That opinion promises to create major administrative headaches for companies with operations in Massachusetts. But businesses in other states aren’t immune. In September, California enacted a law that will give registered domestic partners most of the spousal rights, benefits, and responsibilities granted under state law. That statute takes effect in 2005. The high courts of New Jersey and Arizona may also see challenges to bans on same-sex marriage this year. The once-clear waters of “spouse”-hood have been muddied at the federal level, too. In June the U.S. Supreme Court ruled that antisodomy laws violate the U.S. Constitution. Although seemingly unrelated, this decision may very well call into question the constitutionality of the Defense of Marriage Act. That law, passed in 1996, defines “spouse” as a person of the opposite sex for the purposes of all federal laws. It also provides that no state shall be required to recognize a same-sex marriage performed under the laws of another state. The Defense of Marriage Act preempts state and local laws and provides the sole overarching definition of “spouse.” Although it would take several years for a challenge to reach the Supreme Court, there is a good chance that DOMA could be struck down. This would leave companies facing a welter of differing state and local laws, as well as litigation claiming that benefits plans violate these laws. In the immediate future, however, changes at the state level pose the biggest concerns for companies, namely uncertainty and risk. In Massachusetts, the situation is still in flux. The state’s high court gave the legislature until May 16 to implement the ruling. Their options include modifying Massachusetts marriage laws to permit same-sex marriage, enacting a civil union statute, attempting to alter the state constitution, or doing nothing and letting the court decide how to implement its decision. No matter which action the legislature takes, the legal recognition of same-sex marriages is likely to mean that if a company has workers in Massachusetts, it will have to expand its employee benefits programs. Many in-state businesses that already provide benefits for employees’ spouses will be required to extend these benefits to same-sex spouses. Whether such an extension will be required by law will depend upon the type of benefits plan in question. Retirement benefits plans, such as 401(k) plans, are regulated exclusively by federal law. Under these plans, a spouse receives the right to be the sole beneficiary of the employee’s retirement benefits after he or she dies. Because the Defense of Marriage Act prohibits the recognition of same-sex marriage in the enforcement of federal laws related to employee benefits plans, retirement plans are not required to treat a surviving same-sex spouse as a traditional “spouse.” But a Massachusetts company’s fully insured health benefits plan is regulated, indirectly, by Massachusetts insurance law. The state supreme court’s ruling, will, in all likelihood, require a company with workers in the state to include a same-sex spouse as an eligible dependent. How will this affect your company? The cost of the additional benefits should be relatively insignificant. The real burdens will be increased administrative complexity and risk of noncompliance. To avoid this, in-house counsel should review their company’s benefits policies. At many businesses: -The existence of a spouse determines the form, amount, timing, and recipient of an employee’s death benefits under a retirement plan. -Spousal consent is required for retirement plan distributions and loans to a married employee. -An employee’s designation of a spouse as beneficiary affects the calculation of distributions that a retirement plan must make to the employee after he or she turns 70. -A retirement plan may be required to comply with a state court domestic relations order that directs the plan to pay a portion of an employee’s retirement benefits to a current or former spouse. -An employee’s spouse is entitled to special health plan enrollment rights under certain circumstances. -An employee’s spouse or former spouse is entitled to continuation of health plan coverage in the event of divorce or the employee’s termination or death. -An employee may be entitled to revoke or modify flexible benefits or “cafeteria” plan elections in the event of the employee’s marriage or divorce or a change in the employment status of the employee’s spouse. -An employee’s spouse may be entitled to require retirement, health insurance, and other benefits plans to respond to requests for information about the plans within specific time frames. Companies with operations in multiple states face even more administrative complexity. Consider the hypothetical example of Corporation X. It has employees in Massachusetts and Florida, maintains a pension plan, and provides health insurance benefits to employees, their spouses, and dependent children (but not to domestic partners). In 2004 an employee of Corporation X who lives in Massachusetts marries a person of the same sex. For purposes of eligibility for health insurance coverage, which is governed by Massachusetts law, the employee is considered married. But, for purposes of compliance with the federal requirements for continuation of health insurance coverage (COBRA) or spousal consent to a pension plan distribution, the employee is not married. Then suppose that in 2005 the employee is transferred to Corporation X’s Florida office. In terms of health insurance eligibility, the employee is suddenly considered unmarried, and the local insurance company may legally refuse to provide coverage to his or her partner. Corporation X’s health plan documents (as opposed to its health insurance policy) may state that an employee’s spouse is eligible for health coverage. But, like many businesses, Corporation X’s benefits plan documents do not define “spouse.” The employee can claim that the Massachusetts marriage entitles the spouse to health coverage, even if the company must self-insure the benefits. And that leaves Corporation X with two unappealing options: pay for the spouse’s medical coverage out of company funds or refuse to pay and risk a lawsuit. To untangle these administrative complexities, and the uncertainty associated with new and evolving laws, corporate counsel and human resources personnel should take several actions: -Perform a thorough review of plan documents, summary plan descriptions, employee handbooks, and policies. -Make the amendments necessary to clarify or add the definition of “spouse” and other relevant provisions. -Analyze and identify the source (federal law, state law, plan provision) of employee benefits plan rules and procedures relating to employee marital status. -Monitor future developments affecting the recognition of same-sex marriages, such as Massachusetts legislation required to implement the Supreme Judicial Court decision and legal challenges to the constitutionality of the Defense of Marriage Act. It hardly matters whether your company is pro, con, or ambivalent on this controversial issue. Early action will enhance your ability to avoid complication and litigation.
R. Gregory Bailey is a partner in the Washington, D.C., office of Holland & Knight. He advises employers on employee benefits and executive compensation issues.

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