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Same-Sex Marriage: Legal, Regulatory and Benefit Changes Are On the Way

General Business News

August 2013

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Same-Sex Marriage: Legal, Regulatory and Benefit Changes Are On the Way

The Supreme Court recently struck down the Federal Defense of Marriage Act. As a result, the many benefits that married couples enjoy will now be available to same-sex married couples who live in one of the 12 states that recognize same-sex marriage. The U.S. Government Accountability Office estimates there are approximately 1,138 federal and 400 state benefits that same-sex couples are now eligible for as a result of the ruling. The court did not go so far as to require broad applicability – holding that states that ban same-sex marriage are not required to recognize unions allowed in other states.

Here is a summary list of some of the benefits that same-sex couples might now be eligible for:

  • Clear both spouses’ debt by jointly filing for bankruptcy
  • Qualify for leave under the Family and Medical Leave Act to care for a spouse
  • Protection under spousal testimonial privilege
  • Spouses may be recognized as a part of pension and 401(k) plans in determining surviving spouse annuities or death benefits
  • Jointly file tax returns
  • Get divorced
  • The ability to inherit a spouse’s estate tax-free
  • Obtain Medicare if they qualify based on a spouse’s employment
  • Qualify for the Federal Employees Health Benefits if one spouse is a member of the armed forces
  • Sponsor the other spouse for an immigration visa
  • Qualify for federal government employee benefits if one spouse works for the government
  • Receive Social Security sub-benefits, such as the surviving spouse benefit
  • Delay enrollment in Medicare Part B and D without penalty if the other spouse still works
  • Receive veterans’ benefits

Many uncertainties surround the exact application of the law. Due to the complexities surrounding federal eligibility laws, no one is certain exactly how many of those benefits will extend to same-sex couples who married in states where same-sex unions are legal but currently live in states where they are not. This issue is expected to mostly impact small and medium-size businesses as an increasing number of large corporations are offering domestic partner benefits regardless of state and federal laws. Small and medium-size businesses that have multistate operations composed of states where same-sex marriage is legal in some but not others are expected to have the hardest time dealing with eligibility and compliance issues.

Direct federal benefits are the easiest to analyze. Take the example of same-sex couples now being eligible for Social Security benefits based on joint spousal income. According to the Congressional Budget Office, this one benefit change alone is expected to increase government costs by approximately $350 million per year starting in 2014.

Another area of uncertainty applies to private companies that contract with the federal government. They might be impacted in regards to hiring and benefits policies regardless of the location of their operation and where their employees live or were married. Many analysts believe it is likely that federal contractors will fall under federal regulations regardless of the state law they operate under. Currently, employers who contract state and federal government work are required to provide certain benefits to employees as part of obtaining these contracts. An example of this is Davis Bacon prevailing wages laws that require non-union companies to provide union equivalent wages and benefits to employees. These requirements, however, only apply to the portion of work that the private company does under government contract. It does not require pervasive changes across all business operations as the striking down of DOMA might.

Employers can expect changes to numerous federal laws that impact workplace regulations as a result of this ruling. Will you be ready for the impact it has on your business?

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These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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