U.S. Attorney General Eric Holder announced today that the federal government will recognize the same-sex marriages performed in Michigan on Saturday, March 22, 2014 before the U.S. Court of Appeals for the Sixth Circuit imposed a stay on the marriages. Michigan Governor Rick Snyder said on Wednesday, March 26, 2014, that the State of Michigan considers those marriages "legal and valid marriages," but that the State of Michigan will not extend any of the benefits of legally married couples to those same-sex spouses while the Sixth Circuit's stay remains in place.
Under guidance issued by the U.S. Department of Health and Human Services on March 14, 2014, insurance companies issuing non-grandfathered group health care policies in Michigan cannot refuse to offer coverage to legally married same-sex spouses if coverage is offered to opposite-sex spouses, because federal regulations prohibit health insurers from discriminating on the basis of sexual orientation. Employers with self-insured group health plans that define "spouse" with reference to state law will generally need to recognize the same-sex spouse, because Michigan has acknowledged the legal status of those marriages (and a self-insured plan is subject only to federal law and not to state law).
Michigan's denial of state benefits to same-sex spouses creates some administrative complexity for employer's group health plans in the short term. Under federal law, a Michigan employee who married his or her same-sex spouse on Saturday is entitled to enroll the spouse in the employer's group health plan (a marriage is a "special enrollment event") and pay required contributions for the spouse's health care coverage on a pre-tax basis for federal income tax purposes. In addition, the value of the spouse's health care coverage in excess of the employee's required contribution is not taxable for federal income tax purposes. However, for Michigan income tax purposes, the employee's contribution for the spouse's coverage must still be made on an after-tax basis, and the value of the spouse's coverage in excess of the employee's contribution is still Michigan taxable income.
Because qualified retirement plans (401(k) plans, profit sharing plans, pension plans) are governed solely by federal law, the same-sex spouses who married in Michigan on Saturday must be treated as "spouses" for all plan purposes. This means that the spouse is now required to be the employee's beneficiary, unless the spouse consents in writing to a different beneficiary; employees should be encouraged to review and update their beneficiary designations. Also, the spouse's consent may now be required before distributions can be made to the employee, depending on the plan.
Michigan employers need to review their employee benefit plan documents and identify what provisions are affected by an employee's Michigan-recognized "marriage," to be prepared for employee inquiries and to ensure the plans are administered in compliance with the plan terms and applicable (changing) law.