1. SUPREME COURT RULES ON SAME-SEX
MARRIAGE AND DOMA: STILL WAITING
FOR GUIDANCE
On June 26, 2013, the United States Supreme Court ruled in a 5-4 decision that § 3 of the Defense of Marriage Act
(DOMA) was unconstitutional under the Fifth Amendment of the United States Constitution. Section 3 of DOMA
affects more than 1,000 federal laws, including those related to estate and gift taxes, Social Security benefits and tax
return filings. Its effect on the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act of
1974 (ERISA) will have a significant impact on employers and employer-sponsored plans.
In the days and weeks following the decision, many experts asserted that employers must (or must not) take various
actions immediately. Adding to the confusion, less than a week after the Supreme Court’s decision, the Treasury
Department’s blog noted plans to delay the employer pay or play excise tax until 2015 (the Treasury later issued
guidance confirming this delay). All of which left employers and their advisers with many questions to mull over.
With the dust finally settling, it appears that employers may be best served by waiting for guidance from the federal
agencies that enforce the laws affected by DOMA. This Alert discusses why this is so.
BACKGROUND ON DOMA
In 1996, President Clinton (D) signed into law DOMA. Section 3 of DOMA defined marriage for all federal law
purposes as a union between one man and one woman; the term “spouse” referred only to a person of the opposite
sex who is a husband or a wife. Under the law, the federal government did not recognize same-sex marriages for any
legal purpose. Individuals in same-sex marriages were, therefore, barred from enjoying those federal marital
benefits afforded to individuals in opposite-sex marriages. These benefits include, for example, receiving employer-
sponsored health benefits on a tax-free basis and the right to continue health coverage under COBRA. DOMA’s
definition of spouse meant that if an employer chose to extend health benefit eligibility to same-sex spouses (or
domestic or civil union partners), the employee would be subject to federal income tax on the value of such benefits,
assuming the individual did not qualify as a tax dependent for such purposes.
DOMA, specifically § 2, also grants states the authority to refuse to recognize same-sex marriages, including those
that have been performed in, and recognized by, other states. This section of DOMA was not challenged in the case
decided by the Court and remains federal law. Thirteen states and the District of Columbia currently permit same-
sex marriage – California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New
Hampshire, New York, Rhode Island, Vermont and Washington. Several states recognize similar types of
relationships, such as civil unions and domestic partnerships, although the Supreme Court’s decision in United
States v. Windsor does not specifically apply to these types of relationships. However, many states do not recognize
same-sex marriage or confer any special status upon these types of relationships.
ALERTWilllis Human Capital Practice
www.willis.com

2. 2 Willis North America • 8/13
SUPREME COURT’S DECISION IN WINDSOR
United States v. Windsor involved a same-sex couple, Edith Windsor and Thea Spyer, married in Canada in 2007 and
residing in New York, a state that recognizes same-sex marriage. When Ms. Spyer died in 2010, she left her entire estate
to her spouse. Ms. Windsor, however, was barred from claiming the federal estate tax exemption for surviving spouses
due to § 3 of DOMA. Ms. Windsor paid the tax bill and sought a refund, which the Internal Revenue Service (IRS) denied.
She then brought suit challenging the constitutionality of § 3 of DOMA. Both the United States District Court and the
U.S. Court of Appeals for the Second Circuit Court of Appeals held that this section of DOMA is unconstitutional and
ordered the U.S. to pay a refund. The U.S. Supreme Court affirmed the holding of the appeals court.
HOW THE RULING AFFECTS EMPLOYER-SPONSORED HEALTH BENEFITS
Federal laws, such as the IRC, ERISA and COBRA, use the terms “spouse” and “marriage” to define and explain who is
specifically entitled to the rights and benefits granted under those laws. With the Court’s ruling that DOMA’s definition
of marriage is unconstitutional, these terms are no longer limited to opposite-sex spouses. The Court’s opinion
appeared to limit itself to those same-sex marriages “made lawful by the State,” but this does nothing to clarify which
same-sex marriages are recognized and for what purposes. This means, for example, that some – but possibly not all –
same-sex spouses could now meet the COBRA definition of a qualified beneficiary and have an independent right to
elect and maintain COBRA (a right opposite-sex spouses already enjoy).
The Court’s ruling does not answer the many questions that employers have, particularly when it comes to determining
who exactly is a same-sex spouse and therefore entitled to federal benefits. Such questions as:
n Will the federal agencies limit themselves to just same-sex marriage or will they extend rights and benefits to civil
unions or domestic partnerships (e.g., spousal equivalent laws)?
n Must the same-sex spouses reside in a state that recognizes same-sex marriage to be entitled to federal benefits or is
it sufficient that they have been legally married in a state that allows such marriages (state of “residence” vs. state of
“celebration”)?
n Will the agencies extend federal benefits retroactively and, if so, what does an employer need to do to address?
n Must employers extend benefits to same-sex spouses or can they choose to exclude them?
n What will happen in states that do not specifically recognize same-sex marriage but where the state tax code
conforms to federal income tax law?
While same-sex spouses residing in a state that recognizes same-sex marriage may be clearly entitled to federal benefits,
until the employer knows how the relevant agencies are answering these questions, any changes they make are likely to
be over- or under-inclusive, and will need to be repeated or, worse, corrected after the fact. An employer also runs
considerable risk if it guesses wrong. For example, an employer who adjusts its payroll to allow same-sex spouses to
participate in its cafeteria plan and pay for coverage on a pre-tax basis and ceases to impute income on the value of the
benefits provided to such same-sex spouses may have to go through this process again if federal regulatory agencies
determine that any same-sex couple legally married in a state that allows for such marriages, regardless of where they
reside, is also entitled to federal benefits. Not only would there be the administration issues to consider, but the
employer could be putting its plan at risk for disqualification if it extends tax benefits to individuals who are not entitled
to them.

3. 3 Willis North America • 8/13
NEXT STEPS
While we wait for agency guidance on the many issues raised by the Supreme Court’s ruling on DOMA, it is important
for employers to take the time to study what these changes could mean for them and their benefit plans.
STEP ONE: KNOW WHAT YOU HAVE
Employers should have a clear understanding of what their plan currently provides and how they have interpreted and
applied those provisions in the past. The Supreme Court’s ruling, since it dealt with the definitions of spouse and
marriage, highlights the importance of clearly worded eligibility in plan documents. Some employers may find that
when it comes to the issue of same-sex spouses, their current eligibility is too vague, or the subject is not addressed at all.
A plan that covers spouses by referencing state law, uses the term “legal spouse” or that does not define the term
“spouse” at all, could automatically be deemed to cover same-sex spouses, even if that is not the employer’s intent.
Employers that currently exclude same-sex spouses will need to review the terms of their plan, particularly if they
reference DOMA and its definition of marriage.
Furthermore, employers may not know if someone they are covering qualifies as a same-sex spouse. Even if the
employer currently extends coverage to domestic partners and same-sex spouses, it may not have differentiated
between same-sex spouses and other spousal-equivalent relationships when it comes to the administration of their
benefit plans. Changes to the employer’s current processes may be necessary to capture this information.
STEP TWO: KNOW WHAT YOU WANT
Employers should have a clear idea as to whom they wish to cover under their benefit plans and should analyze their current
benefit eligibility to determine if the terms of the plan are in agreement with that decision. For example, do the current
terms of the plan extend eligibility (by design or default) to the following individuals (and is this the employer’s intent)?
n Common law spouses
n Legally separated spouses
n Spouses eligible for coverage through their own employer’s plan
n Step-children
n Children for whom the employee is a legal guardian
n Grandchildren
An employer cannot realistically begin the plan amendment process until it knows who it wants or needs to cover.
Many employers are currently pondering the benefit eligibility issue in light of health care reform and its
many requirements. Under the employer pay or play mandate, large employers – those with 50 or more full-
time employees (generally counting part-time employees as fractions) – may incur a penalty tax unless they
meet standards for offering health coverage to their full-time employees.
Specifically, no employer will incur the penalty tax if it offers its full-time employees and those employees’
dependents “minimum essential coverage” and, with respect to the full-time employees, the coverage is
affordable and provides minimum value. While the health care reform law generally defines a full-time
employee as being employed for an average of at least 30 hours of service per week, the employer may
currently have a different definition or have certain classifications of employees that are excluded regardless
of the number of hours worked in a week (e.g., temporary or seasonal). The pay or play excise taxes require
coverage for full-time employees and their dependents, but the term dependents does not include spouses.
The pay or play excise tax was set to become effective for coverage provided during 2014, but the IRS
announced a delay of the pay or play penalties and related information reporting requirements until 2015
(other requirements under the health care reform law that are effective in 2014 are not affected). As
employers anticipate implementing whatever guidance is coming from federal agencies regarding the DOMA
decision and prepare to comply with health care reform provisions other than pay or play, the pay or play
delay is particularly welcome.

4. 4 Willis North America • 8/13
STEP 3: WAIT FOR GUIDANCE
While the ruling has generated many employee questions regarding their employer-sponsored health benefits and has
resulted in employees demanding immediate changes, employers must approach the issue carefully and thoughtfully.
Acting immediately, such as amending the employer’s plan to include or exclude same-sex spouses and changing current
payroll processes to stop reporting imputed income, without having the necessary guidance, could result in having to
undo or redo changes once the agencies release guidance.
CONCLUSION
The full implications of this decision and its effect on employers and employer-sponsored plans are unclear. Additional
guidance from the IRS and other regulatory agencies is needed. Employers should consult with their tax advisers and
legal counsel before changing their benefit plans in response to the ruling. The National Legal & Research Group will
continue to provide updates on guidance, as it becomes available.

5. NEW ENGLAND
Auburn, ME
207 783 2211
Bangor, ME
207 942 4671
Boston, MA
617 437 6900
Burlington, VT
802 264 9536
Hartford, CT
860 756 7365
Manchester, NH
603 627 9583
Portland, ME
207 553 2131
Shelton, CT
203 924 2994
NORTHEAST
Buffalo, NY
716 856 1100
Morristown, NJ
973 539 1923
Mt. Laurel, NJ
856 914 4600
New York, NY
212 915 8802
Norwalk, CT
203 523 0501
Radnor, PA
610 254 7289
Wilmington, DE
302 397 0171
ATLANTIC
Baltimore, MD
410 584 7528
Knoxville, TN
865 588 8101
Memphis, TN
901 248 3103
Metro DC
301 581 4262
Nashville, TN
615 872 3716
Norfolk, VA
757 628 2303
Reston, VA
703 435 7078
Richmond, VA
804 527 2343
Rockville, MD
301 692 3025
SOUTHEAST
Atlanta, GA
404 224 5000
Birmingham, AL
205 871 3300
Charlotte, NC
704 344 4856
Gainesville, FL
352 378 2511
Greenville, SC
704 344 4856
Jacksonville, FL
904 562 5552
Marietta, GA
770 425 6700
Miami, FL
305 421 6208
Mobile, AL
251 544 0212
Orlando, FL
407 562 2493
Raleigh, NC
704 344 4856
Savannah, GA
912 239 9047
Tallahassee, FL
850 385 3636
Tampa, FL
813 281 2095
Vero Beach, FL
772 469 2843
MIDWEST
Appleton, WI
800 236 3311
Chicago, IL
312 288 7700
312 348 7700
Cleveland, OH
216 861 9100
Columbus, OH
614 326 4722
Detroit, MI
248 539 6600
Grand Rapids, MI
616 957 2020
KEY CONTACTS
U.S. HUMAN CAPITAL PRACTICE OFFICE LOCATIONS
Willis North America

6. Milwaukee, WI
262 780 3476
Minneapolis, MN
763 302 7131
763 302 7209
Moline, IL
309 764 9666
Pittsburgh, PA
412 645 8506
Schaumburg, IL
847 517 3469
SOUTH CENTRAL
Amarillo, TX
806 376 4761
Austin, TX
512 651 1660
Dallas, TX
972 715 2194
972 715 6272
Denver, CO
303 765 1564
303 773 1373
Houston, TX
713 625 1017
713 625 1082
McAllen, TX
956 682 9423
Mills, WY
307 266 6568
New Orleans, LA
504 581 6151
Oklahoma City, OK
405 232 0651
Overland Park, KS
913 339 0800
San Antonio, TX
210 979 7470
Wichita, KS
316 263 3211
WESTERN
Fresno, CA
559 256 6212
Irvine, CA
949 885 1200
Las Vegas, NV
602 787 6235
602 787 6078
Los Angeles, CA
213 607 6300
Phoenix, AZ
602 787 6235
602 787 6078
Portland, OR
503 274 6224
Rancho/Irvine, CA
562 435 2259
San Diego, CA
858 678 2000
858 678 2132
San Francisco, CA
415 291 1567
San Jose, CA
408 436 7000
Seattle, WA
800 456 1415
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