Both supporters and opponents of same-sex marriage in Idaho are on hold after the United States District Court for the District of Idaho’s decision invalidating Idaho’s same-sex marriage ban was delayed pending appeal to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit has fast tracked the appeal, but it will not hear oral argument until September and a decision will not likely be issued for several months after that.
In the meantime, Idaho employers should prepare for the real possibility that same-sex marriages will be recognized by Idaho in the near future and take steps to comply new federal rules on same-sex marriage by determining whether to extend employee benefits to same-sex spouses and ensuring that decision is properly documented.
Same-sex spouse coverage not required
Even if same-sex marriages are recognized in Idaho, state and federal laws generally do not require employers to extend employee benefits to same-sex spouses. For example, if an Idaho employer allows employees to elect health coverage for opposite-sex spouses, the employer will not be required under federal or Idaho law to also offer coverage to same-sex spouses (even if the Idaho ban is invalidated).
Accordingly, it is important for employers to determine whether they will offer medical coverage and other employee benefits to same-sex spouses. Many employers are waiting to make a decision regarding same-sex spouse coverage until an employee requests coverage for his or her same-sex spouse. However, an after-the-fact decision can be problematic for several reasons and invites litigation. Employers that decide to limit coverage to opposite-sex spouses will be in a much better position if they document that decision before same-sex spouse coverage is requested.
Potential discrimination issues
As employers determine whether to offer coverage to same-sex spouses, they should keep in mind that although federal and Idaho law do not require employers to offer same-sex spouse coverage, other applicable law may require such coverage.
Several Idaho cities (including Boise, Coeur d’Alene, Ketchum, Moscow, Sandpoint, Idaho Falls, Pocatello and, most recently, Victor) have adopted ordinances prohibiting discrimination on the basis of sexual attraction. If Idaho begins to recognize same-sex marriage, employers that offer medical coverage and other employee benefits to opposite-sex spouses of employees in these cities could violate these non-discrimination ordinances if they do not also offer benefits to same-sex spouses.
In addition, the law of other states may require Idaho employers offering opposite-sex spouse benefits to employees in other states to also offer same-sex spouse benefits. For example, if an Idaho employer has California employees, any spousal coverage should be offered to both opposite-sex and same-sex spouses of California employees.
Potential employment tax issues
Finally, as employers determine whether or not to offer same-sex spouse coverage, they should also examine the employment tax consequences of that decision.
For federal employment tax purposes, same-sex spouse coverage is generally tax-free. However, the value of benefits provided to same-sex spouses is taxable for Idaho income tax purposes. This may change depending on the Ninth Circuit’s decision on Idaho’s same-sex marriage ban. The taxation of benefits provided to same-sex couples varies from state to state.
Ensure plan documentation reflects decision
Once an employer decides whether or not to offer coverage to same-sex spouses, it should carefully review plan documentation to confirm it is consistent with that decision.
Plan documentation for medical and other employee benefits is often ambiguous. For example, many medical plans define spouse as any “legal spouse.” This definition is ambiguous in light of the many recent changes to the law regarding same-sex spouses and should be clarified. An ambiguous definition of spouse can cause a significant litigation risk if a same-sex spouse is denied coverage and is inclined to test his or her rights in court.
Even though many questions remain regarding an employer’s obligation to recognize same-sex spouses, it is important for employers to be proactive in deciding whether or not to offer same-sex spouse coverage and ensuring that plan documents are revised accordingly.
Bret Clark is an attorney with Holland & Hart LLP. He specializes in employee benefits and executive compensation matters.