On Nov. 6, 2012, Washington voters approved same-sex marriage in Washington state. This advisory explains the impact of this new law on employee benefit plans and procedures, and revisits the treatment of employee benefits for domestic partners and same-sex spouses.


On Feb. 13, 2012, Gov. Christine Gregoire signed SB 6239 legalizing same-sex marriage in Washington state. This new law would have been effective June 7, 2012, but opponents obtained enough signatures for a referendum, which was duly approved by Washington voters on Nov. 6, 2012. SB 6239 is often referred to as the Marriage Equality Act, and builds on the foundations set by the “everything but marriage” law, which Washington voters also approved by referendum, in November 2009. Under the “everything but marriage” law, state registered domestic partners are treated the same as married spouses under Washington state law. The Marriage Equality Act goes further, by legalizing same-sex marriage and converting many domestic partnerships into marriages.

Employers should now assess the impact of the Marriage Equality Act on their employee benefit plans and procedures (which should already have been reviewed and revised to ensure compliance with the “everything but marriage” law). This advisory revisits the employee benefits compliance issues that arose from “everything but marriage” and addresses additional benefits issues arising from the Marriage Equality Act.

What steps should employers take to comply with the new law?

Review health and welfare plans.

  • Decide how “domestic partner” and “spouse” will be defined, whether non-registered domestic partners should continue to be covered after June 30, 2014, and update definitions.
  • Review eligibility provisions for parity between opposite-sex spouse and domestic partner/same-sex spouse benefits.
  • Consider whether self-insured plans should have a different definition than insured plans (see pre-emption discussion below).

Review Code Section 125 cafeteria plans.

  • Compare eligibility provisions of the Section 125 cafeteria plan to the eligibility provisions of health and welfare plans.
  • Confirm that the tax treatment and general administration of various benefit arrangements are consistent with the documents and the law.

Communicate with insurance providers to provide parity in benefits for registered domestic partners and same-sex spouses and to ensure COBRA-like coverage, if desired.

Review qualified plans.

  • Decide how “domestic partner” and “spouse” will be defined, and update definitions.
  • Consider impact of potential demise of DOMA.
  • Review provisions for parity between opposite-sex spouse and domestic partner/same-sex spouse benefits. For example, review beneficiary designations, annuity provisions and QDRO procedures.

Review nonqualified deferred compensation plans.

Review and update the definitions of spouse, domestic partner and beneficiary designations.

Revise employee handbooks, participant communications and internal policies.

  • Reflect new benefit provisions for domestic partners and same-sex spouses.
  • Consider whether to replace your domestic partner policy with a policy that recognizes only valid marriages, except where the Marriage Equality Act continues to permit state registered domestic partnerships, such as where one of the domestic partners is age 62 or older.

Review federal tax treatment of domestic partner and same-sex spouse benefits and update administrative policies and participant communications.

Closely monitor developments related to the evolving state and federal treatment of domestic partners and same-sex spouses. Benefits policies and practices may require subsequent amendment.

What is the new law and how does it differ from “everything but marriage”?

“Everything but marriage” required state registered domestic partners to be treated the same as married spouses under Washington law. This meant that any benefits an employer provided to a spouse also had to be provided to registered domestic partners, unless Washington state law was “pre-empted” (see below). “Everything but marriage” achieved this result by interpreting certain terms (such as “spouse,” “husband,” “wife” and “marriage”) throughout Washington law as applying equally to state-registered domestic partners. Under this law, if certain requirements were met, state-registered domestic partners could be either same-sex partners, or partners of the opposite sex if at least one partner was age 62 or older. Employers were not required to provide benefits to unregistered domestic partners under “everything but marriage”, but could choose to do so.

The Marriage Equality Act goes further by legalizing same-sex marriage, effective Dec. 6, 2012. It achieves this by defining marriage as a civil contract between two persons (i.e. references to male and female” and “husband and wife” in this context are deleted) and requires gender specific terms used in any statute, rule, or other law to be interpreted as gender neutral and applicable to spouses of the same sex. Marriages between same-sex spouses who are legally married in another state would be valid in Washington, and domestic partners currently in a state registered domestic partnership may get married in Washington state.

In addition, the Marriage Equality Act converts many registered domestic partnerships into marriages, and changes the rules relating to registration of domestic partnerships. These rules are described in the next section.

What happens to domestic partnerships in Washington?

Given that the Marriage Equality Act now permits same-sex partners to marry in Washington, it revises the rules regarding domestic partnerships, as follows:

  • Effective June 30, 2014, domestic partnerships (same or opposite sex) may register in Washington only if at least one of the partners is age 62 or older and certain other conditions are met.
  • Same-sex domestic partnerships that were registered in Washington prior to June 30, 2014 and have not been dissolved or converted into marriages will be automatically converted into marriages as of June 30, 2014, unless one of the partners is age 62 or older. To avoid automatic conversion, state registered domestic partnerships must take action to dissolve in accordance with Washington law prior to June 30, 2014.
  • Legal unions, other than marriages, validly formed in another state that provide substantially the same rights, benefits and responsibilities as marriage, but which do not meet Washington’s definition of a domestic partnership, are treated as having the same rights and responsibilities as married spouses in Washington. However, this treatment will not apply if the partners do not get married within one year after becoming permanent residents of Washington, unless at least one of the partners is age 62 or older.

How are insured group health plans affected?

Under “everything but marriage,” if health coverage or other benefits are provided to married spouses through an insurance policy, such benefits must also be provided to registered domestic partners. The Marriage Equality Act extends this treatment to same-sex spouses.

No formal amendment to group policies is required. While insured plans are often subject to the Employee Retirement Income Security Act of 1974 (ERISA), ERISA permits the state regulation of “insured” benefits.

How are self-insured group health plans affected?

Most self-insured health and welfare plans are governed by ERISA, which pre-empts state regulation. ERISA plans follow federal law, which under Section 3 of the federal Defense of Marriage Act (DOMA) defines ”marriage” to mean a legal union between one man and one woman as husband and wife, and “spouse” to mean a person of the opposite sex who is a husband or wife.

DOMA remains current federal law, although this may change in the near future. The U.S. Attorney General has stated that the Department of Justice will no longer defend DOMA because it is unconstitutional. Also, a number of courts have held that Section 3 of DOMA is unconstitutional, including the 1st and 2nd Circuit Court of Appeals. In Massachusetts v. United States Department of Health & Human Services, the 1st Circuit held that the DOMA definition of marriage is unconstitutional on equal protection grounds, although the court stayed injunctive relief pending Supreme Court review of DOMA. In Windsor v. United States, the 2nd Circuit held that Section 3 of DOMA is unconstitutional because DOMA’s classification of same sex spouses was not substantially related to an important governmental interest, accordingly, Section 3 of DOMA violated equal protection. The Windsor decision is also the first appellate court decision to hold that laws affecting homosexuals compose a class that is subject to heightened scrutiny. These cases, along with others, are pending review by the Supreme Court. If DOMA is declared unconstitutional by the Supreme Court, plans must be prepared to deal with the consequences.

Pending a decision by the Supreme Court that Section 3 of DOMA is unconstitutional, or a repeal of DOMA by Congress, currently, domestic partners and same-sex spouses cannot be “spouses” for federal law purposes. Accordingly, self-insured health and welfare plans that are governed by ERISA are not required to provide coverage to domestic partners and same-sex spouses, and may limit the definition of “spouse” to mean an opposite-sex spouse. However, employers at their discretion may choose to provide self-insured benefits to domestic partners and same-sex spouses.

Employers who have self-insured group health plans should carefully communicate eligibility information to employees to avoid confusion and possible claims of discrimination. Also, employers should be aware that their self-insured plans may conflict with their insured plans.

Are self-insured plans of church or governmental entities treated differently?

Self-insured governmental and church plans are not subject to ERISA pre-emption and are, therefore, generally subject to the domestic partner and same-sex coverage obligations. However, the Washington state insurance commissioner has generally refused to exercise jurisdiction over these plans. Therefore, compliance will likely be enforced only through participant lawsuits.

Note: a church plan may elect to be subject to ERISA, and if a valid election is made, ERISA will pre-empt state law and the plan will not be required to provide coverage to domestic partners or to same-sex spouses.

How does the new law impact open or special enrollment?

There is no definitive guidance on how the new law impacts open or special enrollment. Generally, for purposes of open or special enrollment, newly registered domestic partnerships and new same-sex marriages should be treated the same as new opposite-sex marriages under insured plans (and also under any self-insured plans that elect to offer such coverage). This is because under HIPAA regulations “dependent” is defined as any individual who is or may become eligible for coverage under the terms of a group health plan because of a relationship to a participant, and this provision supports parity in treatment for domestic partners and same-sex spouses.

Will state law require coverage of children of domestic partners or same-sex spouses?

If an insured plan provides coverage for children, state law will require coverage of an unmarried child of a domestic partner or same-sex spouse to age 26.

With respect to an ERISA self-insured plan, health care reform does not require coverage of children of domestic partners or same-sex spouses, and ERISA will pre-empt state insurance laws. Therefore, while an ERISA self-insured plan covering dependents will be required to cover such a dependent to age 26, the ERISA plan could refuse to provide such coverage to children of domestic partners or same-sex spouses. However, the plan must have a clear definition of “spouse” and “child,” in order to achieve such a result.

Should an employer expect litigation if its self-insured plan excludes either domestic partners, same-sex spouses or their children?

Yes, domestic partner and same sex issues, and the validity of DOMA, are being actively litigated. If successful, an employee could seek retroactive enrollment. Aside from the litigation risk and distraction, an employer who is providing both insured and self-insured benefits should weigh the administrative and staff relations problems associated with having different definitions of “spouse” and “child” for different benefits.

May employers provide benefits to unregistered domestic partners and opposite-sex domestic partners?

Yes, but they are not required to do so. If you are making distinctions between registered and unregistered domestic partners and same- or opposite-sex partners, make sure these distinctions are described clearly in your plan documents and participant communication materials. Such distinctions may raise staff relations issues and claims of discrimination.

Is there a “conscience clause” exception for religious entities?

No, but employers can meet compliance obligations without specifically endorsing domestic partner or same-sex spouse rights by offering employee-plus-one adult coverage or adopting a separate category of dependents that encompasses, but is not limited to, domestic partners and same-sex spouses.

What about COBRA benefits?

While employers may voluntarily offer domestic partners, same-sex spouses and their dependents a COBRA-like benefit, Washington law does not require the extension of COBRA rights to such persons. However, because COBRA does not apply, make sure that your insurance carrier (or stop-loss carrier in a self-funded plan) has approved such coverage, before you extend such coverage to same-sex spouses or domestic partners.

What about life insurance and AD&D benefits?

Life insurance and accidental death and dismemberment plans will be governed by state law and benefits should, therefore, be extended to registered domestic partners and same-sex spouses. Make sure that your insurance carrier covers such individuals and that their definitions are satisfied.

What are the federal tax implications of domestic partner and same-sex spouse benefits?

Federal tax rules govern the tax treatment of domestic partner, and same-sex spouse, benefits. Generally, if a domestic partner or a same-sex spouse, and his/her dependents, are an employee’s Internal Revenue Code (“Code”) Section 105(b) tax dependents, the value of the health coverage is not subject to federal income and employment taxes, and the benefits provided will be tax-free. Also, the IRS has stated that if a same-sex partner is the stepparent of his or her partner’s child under the laws of the state in which the partners reside, then the same-sex partner is the stepparent of the child for federal income tax purposes. (See http://www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Same-Sex-Married-Couples). This would mean that the stepchild is the same-sex partner’s Section 105(b) dependent.

If a domestic partner or same-sex spouse, and his/her dependents, are not Code Section 105(b) tax dependents, the value of employer-paid coverage will be treated as imputed income to the covered employee and reported on Form W-2. If the employee is required to pay all or part of the cost of such coverage, those premiums may be paid by the employee with after-tax income. Alternatively, the employee may pay the premiums on a pre-tax basis through a Code Section 125 cafeteria plan, but the value of coverage will then be imputed back to the employee. Domestic partner/same-sex spouse benefits are generally taxed on the fair market value, which employers often interpret to mean the COBRA premium.

The DOMA definition of “spouse” also applies to health care flexible spending accounts, health reimbursement arrangements and health savings accounts. Therefore, an employee may obtain reimbursement from such accounts for medical expenses of a domestic partner, same-sex spouse or their children only if they are his Code 105(b) tax dependents. Also, the value of employer paid life insurance or AD&D benefits will also be taxable income to the employee.

Since Section 125 cafeteria plans and the underlying group health plans may define “spouse” and “dependent” differently, employers should closely compare the plan documents and make appropriate disclosures to employees.

How are retirement plans affected?

The question here is the extent to which tax qualified retirement plans are required to recognize same-sex marriages when interpreting plan provisions that reference a “spouse.” Retirement plans are generally governed by ERISA (except for church and governmental plans), which pre-empts state law. Therefore, the DOMA definition of spouse applies, the effect of which is to ignore a same-sex marriage. (See above for a discussion of the current status of DOMA.)

However, ERISA does not prevent employers from treating domestic partners, or same-sex spouses, as spouses in their retirement plans. For most purposes, this allows for a policy of consistent treatment across benefits. For example:

  • A default beneficiary in a retirement plan could be a registered domestic partner, or a same-sex spouse.
  • Defined benefit and money purchase pension plans could permit participants to elect a joint and survivor annuity with their same-sex spouse as beneficiary, or could automatically provide that a same-sex spouse is the beneficiary. Similarly, such plans could also provide pre-retirement survivor annuities to same-sex spouses.
  • 401(k) plans may be drafted to permit hardship distributions affecting the participant’s primary beneficiary, which could include a domestic partner or a same-sex spouse.

Qualified domestic relations orders (QDROs) present yet another issue. Under ERISA and the Code, a QDRO must relate to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a participant, which is made pursuant to state domestic relations law. While DOMA prevents a same-sex spouse from being a “spouse” under this definition, a same-sex spouse could be an alternate payee if he or she is the participant’s tax dependent. An alternative interpretation is that as a domestic relations order is made pursuant to state law, an alternative payee who is a same-sex spouse under state law may receive a distribution as a spouse. Also, with respect to domestic partners, the 9th Circuit Court of Appeals in Owens v. Automotive Machinists Pension Trust upheld a Washington court decision holding an opposite sex domestic partner to be a dependent under Code Section 152 and, therefore, an alternate payee under a QDRO. The court also held that the QDRO related to marital property because that was the conclusion under Washington state domestic relations law. Plans should be amended carefully to reflect the individuals who will be recognized as alternate payees.

If you have questions or would like to discuss the Washington Marriage Equality Act, please contact your usual Davis Wright Tremaine benefits lawyer.