The Same Sex Marriage Ruling (And What It Means for HR)
July 1, 2015
Same-sex marriage: Leaving the politics and religious aspects aside, what does this mean for employers?

Same-sex marriage: Leaving the politics and religious aspects aside, what does this mean for employers?

So thanks to Friday’s 5-4 ruling from the Supreme Court of the United States, same sex marriage is the law of the land. The court ruled in Obergefell v. Hodges that all 50 states must issue marriage licenses to same sex couples under the same terms and processes they do to heterosexual couples.

This post will take business owners, managers, and the HR people who advise them through the steps many employers will have to take to bring their own benefit plans and systems into compliance with the new ruling as federal and state government agencies and legislators work through the process on their end. It will also explore some of the key decisions businesses will have to make.

Leaving the politics and religious aspects aside, what does this mean for employers?

First, if you are in a state that had not been issuing same sex marriage licenses before, you may see a local surge of pent up demand as gay and lesbian employees go out and get married. They may have been putting things off because they didn’t want to travel out of state, or they wanted to have their nuptials close to home.

Whatever the case, employers and human resources professionals in states that will shortly be issuing marriage licenses to same-sex couples should be aware of the landscape, and in some cases, make some changes or prepare for some changes.

So what should you tell your boss?

First, the good news: Life should shortly get much simpler for human resources, benefits and payroll administrators. The current patchwork of laws relating to same sex marriage created a whole series of snafus when it came to running pay systems and classifying employees. For example, companies had to treat all married employees as married for federal tax purposes but had to treat same-sex couples and heterosexual married couples differently from each other for state tax purposes – which was a problem for companies with employees in different states. This overwhelmed the capabilities of many payroll and benefits administration software programs designed just a couple of years ago, and therefore required a ton of effort in manually processing or inputting things that used to be automatic. According to an amicus brief filed in support of same sex marriage, joined by 379 large employers, the compliance effort cost employers up to $1 billion per year.

Once the procedures catch up with the ruling, all of these kinds of headaches should shortly resolve themselves.

The downside, from the employer perspective, is the prospect of health insurance premiums and other employer-paid expenses going up as newly-married workers enroll their same-sex spouses onto their workplace family plans. Naturally, under the ruling, any attempt to discriminate against married couples because of their same-sex status is going to be 1.) legally untenable and 2.) atrocious PR.

Medical Insurance and Retirement Plans. If your plan didn’t recognize same-sex spouses as beneficiaries, it does now! Or it will, as soon as administration has a chance to catch up with the new requirements. You may need to update your own plan documents to comply with this change.

Gross-ups. One bright spot for employers is the vanishing need for ‘gross-ups.’ This term refers to the practice of padding employee taxable compensation in order to account for taxes on imputed income for domestic partner benefits for unmarried employees. Employers may consider cancelling the domestic partner benefit altogether, and restricting it to married couples. This may cause some squawking among workers who want to have the domestic partner benefits but don’t want to marry, but will also reduce any gross-up payments. The amount saved can go to funding additional benefits for married couples as a group, to offsetting additional premiums for new spouses enrolling in the plan, or, of course, for anything else the employer wishes.

Family Medical Leave. Your company may find itself required to grant family medical leave to more people, in the event of a family medical emergency or challenge. In states that did not recognize same-sex marriage, and where the affected employee was not legally married, companies were not required to grant medical leave. However, companies will no longer have the option to discriminate on the basis of same sex marriage.

Workplace Environment Issues. Naturally, feelings can run hot on both sides of the issue. The President lit up the White House in rainbow colors, but such displays may not go over well with some employees who have traditional beliefs. If your office tends to discourage displays of religious material in the workplace, consider getting ahead of the issue by applying the same policy to ‘rainbow’ displays as well. Work with managers to get the word out that the company expects everyone to treat every other viewpoint with respect.

Workplace Discrimination. The Supreme Court ruling does not affect state laws dealing with workplace discrimination. It does not magically make GLBT workers a protected class for the purposes of employment law, though the Justice Department has asserted the authority to prosecute employers who discriminate against transgenders under the auspices of enforcing laws against sex discrimination. GLBT workers and applicants are a protected class in some states but not in others.

Employers With Religious Objections to Same Sex Marriage. If you or your employer have religious or moral objections to granting benefits to same-sex marriages, you probably won’t be able to discriminate against same-sex couples for long. The legal landscape does not favor you, even if you can point to a longstanding and heartfelt religious objection. Your company will likely be a discrimination lawsuit target painted on your back, and you will probably lose.

Whither Domestic Partner Benefits? Employers currently offering family benefits to unmarried same-sex domestic partners but not to unmarried heterosexual couples will have to decide whether to keep up the domestic partner benefits or cancel them and bring everything under the same roof, and offer benefits only to married couples. This may mean you will have to tell some unmarried employees with domestic partners that they won’t be eligible for benefits (unless they get married). Delta Airlines and Verizon Communications have already made the announcement that they are going this route, after giving their workers advanced notice to either marry or find benefits elsewhere.

Can You Cease Offering Spousal Benefits Altogether?If your company’s owner or owners have objections to providing benefits to same-sex partners, the only option is to stop offering spousal benefits altogether – if state law and the Affordable Care Act allow. A Mercer survey from 2014 shows that 17 percent of employers do not offer spousal benefits at all (up from 12 percent in 2012), or impose a median surcharge of $100 per month. According to the Mercer study, “some employers now impose a surcharge on the premiums for spouses who have other coverage available (9% of large employers) or even make them ineligible for coverage (also 9%).  The median surcharge is an additional $100 per month. The largest organizations, which tend to offer more generous coverage and can become “dependent magnets,” have moved the fastest to impose surcharges: 27% of employers with 20,000 or more employees did so in 2014, up from 20% last year.  However, only 5% of these jumbo employers exclude spouses with other coverage.”

HR Pro-Tip: While no one wants to pay more in premiums than they have to, a sharp HR pro can argue convincingly that expanding workplace benefits to same-sex married couples goes that much further to cementing the employer value proposition to desirable talent – who would otherwise probably seek greener pastures unless they were included in company plans anyway. For example, fully two thirds of Fortune 500 companies were already offering the full range of employee benefits to same sex couples before the ruling. It was practically a done deal already – now that everyone in the country has to come on board, there is no cost disadvantage compared to U.S.- based competitors to doing so.