U.S. v. Windsor and its Implications for Employers

1. U.S. v. Windsor and its Implications for Employers Cynthia Boyle Lande BrownWinick 666 Grand Avenue, Suite 2000 Des Moines, IA 50309-2510 Telephone: 515-242-2476 Facsimile: 515-323-8576 E-mail: lande@brownwinick.com

2. Overview • Statute • U.S. v. Windsor decision • Benefits Implications for Employers

3. Federal Defense of Marriage Act (“DOMA”) • Section 2: No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other state, territory, possession, or tribe, or a right or claim arising from such relationship. • Section 3: In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife.

4. U.S. v. Windsor • Facts: New York residents Thea Spyer and Edith Windsor married in Canada in 2007. Spyer died in 2009 and left her entire estate to Windsor. Windsor sought to take a Federal estate tax exemption as a surviving spouse, but Section 3 of DOMA barred her from doing so. As a result, Windsor paid $363,053 in estate taxes that she would not have paid if she had been treated as a surviving spouse for estate tax purposes.

5. U.S. v. Windsor • Procedure: Windsor brought a suit for a refund in the U.S. District Court for the Southern District of New York. The District Court found Section 3 of DOMA unconstitutional and rules in favor of Windsor. The Court of Appeals for the Second Circuit affirmed the District Court’s judgment. The Supreme Court granted certiorari on the question of the constitutionality of Section 3 of DOMA. • The Supreme Court ruled in a 5-4 decision that Section 3 of DOMA was unconstitutional

6. Benefits Implications for Employers • Employer-Provided Health Insurance • Cafeteria Plans, HSAs, and FSAs • Retirement Plan Payment Methods and Spousal Protections

7. Employer-Provided Health Insurance • Under the Internal Revenue Code, employer-provided health benefits are only excluded from an employee’s taxable income for the employee, the employee’s spouse, or the employee’s dependents • The IRS has not yet issued guidance on prior year treatment for employers • Changes also apply to cafeteria plans, health savings accounts, and flexible spending arrangements

8. Retirement Plans • Spouses are default beneficiaries • A qualified joint and survivor annuity is the default payment method for married participants in pension plans • Spousal consent is required to change beneficiary to another person or to alter default payment methods

9. Retirement Plans (Continued) • QDROs • Required Minimum Distributions • Rollovers

10. Other Implications • FMLA • COBRA • Prohibited Transaction and Owner Attribution Rules

11. Website: www.brownwinick.com Toll Free Phone Number: 1-888-282-3515 OFFICE LOCATIONS: 666 Grand Avenue, Suite 2000 Des Moines, Iowa 50309-2510 Telephone: (515) 242-2400 Facsimile: (515) 283-0231 616 Franklin Place Pella, Iowa 50219 Telephone: (641) 628-4513 Facsimile: (641) 628-8494 DISCLAIMER: No oral or written statement made by BrownWinick attorneys should be interpreted by the recipient as suggesting a need to obtain legal counsel from BrownWinick or any other firm, nor as suggesting a need to take legal action. Do not attempt to solve individual problems upon the basis of general information provided by any BrownWinick attorney, as slight changes in fact situations may cause a material change in legal result.