Impact of the Colorado Civil Union Act on Public Plans. Kathleen A. Odle Sherman & Howard L.L.C. Denver, CO

Transcription

1 Impact of the Colorado Civil Union Act on Public Plans Kathleen A. dle Sherman & Howard L.L.C. Denver, C kodle@shermanhoward.com (303)

2 History of the Colorado Civil Union Act

3 History of the Colorado Civil Union Act n March 21, 2013, Governor John Hickenlooper signed the Colorado Civil Union Act ( CCUA ) into law, authorizing any two unmarried and otherwise eligible adults, regardless of gender, to enter into a civil union. The Act took effect on May 1, 2013* *Some changes under the CCUA that will be discussed later do not go into effect until January 1, 2014

4 Purpose of the CCUA To provide eligible couples the opportunity to obtain the rights, benefits, protections, duties, obligations, and responsibilities granted or imposed under the law to married persons. To protect individuals against discrimination based on spousal status in employment, housing and places of public accommodation. To grant reciprocity by recognizing relationships similar to civil unions legally created in other jurisdictions.

5 WHAT DID CCUA CHANGE IN THE STATUTES? The CCUA effectively modifies the Colorado Revised Statutes to include a party to a civil union or partner to a civil union in any definition or use of the terms dependent, family, heir, immediate family, next of kin, spouse, and any other term that denotes familial or spousal relationship.

6 WHAT DES CCUA SAY ABUT BENEFITS? CRS (1) states: A party to a civil union has the rights, benefits, protections, duties, obligations, responsibilities, and other incidents under law as are granted to or imposed upon spouses, whether those rights, benefits, protections, duties, obligations, responsibilities, and other incidents derive from statute, administrative or court rule, policy, common law, or any other source of law.

7 WHAT IS AFFECTED BY THE CCUA? Some of the rights impacted by the CCUA include, BUT ARE NT LIMITED T: Prohibitions against discrimination based upon spousal status Survivor benefits under and inclusion in workers compensation laws The right of a partner in a civil union to be treated as a family member for unemployment benefits The ability to insure a party to a civil union under group benefit plans for state employees The ability to designate a party to a civil union as a beneficiary under the state public employees retirement system Survivor benefits under local government firefighter and police pension Family leave benefits

8 WHAT IS NT AFFECTED BY THE CCUA? The CCUA does not impact federal laws nor does it extend the protection of federal laws to civil union partners, including the Defense of Marriage Act ( DMA ), Social Security laws, the Internal Revenue Code ( Code ) rules and regulations, and ERISA laws. The CCUA also does not impact certain overlapping state and federal laws. For instance, because federal tax laws currently prohibit civil union partners from filing a joint income tax return, the CCUA prohibits the filing of a joint state income tax return. The CCUA will not require plans that do not currently provide coverage to spouses to provide coverage to civil union partners. The CCUA does not modify Colorado s policy that only the union of one man and one woman constitutes marriage.

9 WHAT IS A CIVIL UNIN? A civil union is a relationship established by two eligible persons that entitles them to receive the benefits and protections and be subject to the responsibilities of spouses. Two individuals (regardless of gender) are eligible to enter into a civil union where both parties are: Adults Not already a party to another civil union Not married to another person Not related to each other A civil union relationship is distinct from a marriage, a domestic partnership, and a common-law marriage.

10 WHAT IS A CIVIL UNIN? A civil union is evidenced by a civil union certificate, a document which certifies that the persons have established a civil union in compliance with the CCUA

11 HW DES THE CCUA AFFECT EMPLYEE BENEFITS The CCUA requires employers with employee benefit plans subject to CCUA to offer the same benefits & rights that are afforded to spouses to civil union partners. The status of each employee benefit plan under the Employee Retirement Income Security Act of 1974 ( ERISA ) determines whether, and to what extent, CCUA applies. For most plans maintained by governmental employers (including cities, towns, special districts, and instrumentalities in Colorado), ERISA does not apply and the CCUA will apply to the extent permitted under other federal laws (such as the Internal Revenue Code).

12 HW DES THE CCUA AFFECT EMPLYEE BENEFITS Some health and welfare programs are controlled by federal law, and are only available to spouses and dependents as federal law defines them. Therefore civil union partners still will not be covered under these types of plans unless the civil union partner qualifies as a dependent under the Code, or unless the Code is amended to treat civil union partners as spouses. It is fairly uncommon for a civil union partner to be able to qualify as a dependent under the Internal Revenue Code.

13 HEALTH AND WELFARE PLANS Medical/Dental/ Vision Insurance Cafeteria Plans Health Care/ Dependent Care Reimbursement Plan Health Savings Account Fully insured policies issued in Colorado and self-insured plans will be required to extend the same coverage offered to spouses to civil union partners. Civil union partners may not participate unless they qualify as a dependent under the Code. Civil union partners may not participate unless they qualify as a dependent under the Code. Civil union partners may not participate unless they qualify as a dependent under the Code. ***The CCUA is effective for health insurance plans issued, delivered, or renewed on or after January 1, 2014

14 LIFE INSURANCE Group Term Life Insurance Subject to the CCUA. Must extend the same coverage, survivor benefits, and default beneficiary status afforded to spouses to civil union partners. Voluntary Term Life Insurance for Employee, Spouse, & Children Subject to the CCUA. Must extend the same survivor benefits and default beneficiary status afforded to spouses to civil union partners. ***The CCUA is effective for life insurance plans issued, delivered, or renewed on or after January 1, 2014

15 DISABILITY INSURANCE Long-Term Disability Insurance Subject to the CCUA. Must extend any survivor benefits and default beneficiary status afforded to spouses to civil union partners. Note that survivor/death benefits under an LTD plan are not common. AD&D (basic and voluntary) Subject to the CCUA. Must extend any survivor benefits, and default beneficiary status afforded to spouses to civil union partners. Short Term Disability Subject to the CCUA. Must extend any survivor benefits afforded to spouses to civil union partners. Most STD plans do not provide any survivor or death benefits.

16 THER PLANS Adoption Assistance Program These plans generally provide benefits to the employee only (no benefits are provided directly to an employee s spouse), and therefore are not subject to the CCUA Employee Assistance Program Subject to the CCUA. Must extend the same benefits afforded to spouses to civil union partners. Education Assistance Program These plans provide benefits to the employee only, and therefore are not subject to the CCUA.

17 THER PLANS Long Term Care Subject to the CCUA. Must extend the same coverage and survivor benefits afforded to spouses to civil union partners, if any. Severance Plan These plans generally provide benefits to the employee only (with no benefits payable upon death), and therefore would not be impacted by CCUA. However, if the severance plan does pay unpaid severance benefits to the deceased former employee s spouse, then CCUA would apply and those death benefits must be provided to civil union partners.

18 RETIREMENT BENEFITS For Section 403(b), 401(a), 401(k), 457(b) and 457(f) retirement plans: The CCUA will require all retirement plans under the Colorado State Public Employees Retirement System, local firefighter and police pensions, and other retirement plans maintained by governmental employers to offer civil union partners the same benefits currently afforded to spouses, including any default beneficiary status and survivor benefits. For example, if a spouse is the default beneficiary in a Code Section 457(b) plan where the participant does not name a beneficiary, a civil union partner now must also be the default beneficiary. The CCUA will not, at this time, effect sections of the retirement plan that are controlled by federal law (i.e. eligible rollover distributions for spouses and required minimum distributions).

19 MRE N RETIREMENT BENEFITS The CCUA will also impact domestic relations orders and apply to the division of plan assets upon the termination of a civil union partnership (however, there may be limitations on early distribution rights in these cases, and the participant may still need to be taxed on the distribution to the alternate payee due to IRS requirements). These requirements went into effect for all beneficiary determinations (i.e. participant deaths) that occurred on or after May 1, Plan amendments putting these changes into place should be approved and executed as soon as possible (by the last day of the current plan year?). Employers should review and, if necessary, update the beneficiary designation forms for their retirement plans as soon as possible.

20 CNTINUATIN CVERAGE Federal CBRA benefits currently are only extended to the spouse, dependent, or child (as defined by federal law) of a terminated employee. Employers that are subject to Colorado Continuation Coverage under C.R.S are now required to extend this coverage to civil union partners. Employers of self-insured plans may also choose to voluntarily extend CBRA-like benefits to civil union partners.

21 TAXATIN

22 TAXATIN Employers that provide medical, dental, or vision benefits for an employee s civil union partner will be required to ensure that the employee is properly taxed for these benefits. The Code only excludes from an employee s taxable income amounts paid by the employer for medical care provided to the employee, the employee s spouse, and the employee s dependents as defined by the Code. Because civil unions are not recognized under the Code, employers must include the value of any health coverage provided to an employee s civil union partner in the employee s taxable income. (This applies to plans governed by the CCUA, and those that voluntarily provide benefits to civil union partners.)

23 CAN YU DEMAND PRF F CIVIL UNIN? The Colorado Anti-Discrimination Act prohibits discrimination based on a person s sexual orientation, religions, disability, race, creed, color, sex, age, national origin or ancestry. Thus, asking an employee for proof of his or her Civil Union when you don t ask married couples for proof of their marriage likely would violate this statute.

24 HME RULE CITIES AND MUNICIPALITIES The question of whether home rule cities and municipalities are subject to the CCUA turns on whether or not the portion of the CCUA affecting benefits and survivor rights is a matter of state or local concern. There is support for the idea that where the state has spoken directly on the issue of providing equal rights and protection to civil union partners (and rather forcefully in the legislative declaration at the beginning of the CCUA), courts at the very least would likely view this as a matter of mixed concern, and home rule cities and municipalities would be subject to the CCUA. However, until more guidance is issued, this question remains unsettled.

25 INTERACTIN F THE CCUA WITH DMA

26 INTERACTIN F THE CCUA WITH DMA n June 26, 2013, in U.S. v. Windsor, the U.S. Supreme Court held that Section 3 of the Defense of Marriage Act ("DMA") was unconstitutional. Section 3 of DMA provided that, for the purpose of any federal law, "marriage" was defined as a legal union between one man and one woman, and "spouse" referred only to a person of the opposite sex who was a husband or wife. Prior to the Windsor decision, same-sex couples, even if married in a state that recognized same-sex marriages, were not treated as married for purposes of federal statutes, such as the Internal Revenue Code. The result of the Windsor decision is that, for the more than 1,000 federal laws and regulations that refer to "marriage" and "spouse," lawful same-sex marriages will now be federally recognized. Significantly, the Court did not strike down Section 2 of DMA which gives states the authority to refuse to recognize samesex marriages performed under the laws of other states.

27 INTERACTIN F THE CCUA WITH DMA The Windsor opinion did not indicate how same-sex couples that were married in a state that recognizes same-sex marriage but living in a state that does not will be treated for purposes of federal laws. Colorado does not recognize same-sex marriages, and under the CCUA, treats any relationship that was legally entered into in another state, but does not comply with Colorado statutes (i.e. a same-sex marriage) as a civil union in Colorado. Federal agencies are expected to issue guidance in the upcoming months addressing these issues. Until that time, employers should begin to review their employee benefit plan documents, administrative policies and procedures, and payroll systems to make sure that same-sex spouses can be treated the same as opposite-sex spouses. Employers should also consider how to make employees aware of the change in the law, and establish procedures for employees that seek coverage for their same-sex spouses.

28 STATES WITH SAME SEX MARRIAGE/CIVIL UNINS Recognizes Same Sex Marriage Recognizes Civil Unions or Domestic Partnerships California Minnesota Colorado Connecticut New Hampshire Hawaii Delaware New York Illinois Iowa Rhode Island Nevada Maine Vermont New Jersey Maryland Washington regon Massachusetts Washington D.C. Wisconsin

29 RECAP: WHAT SHULD YU BE DING? Review your current employee benefit plans to determine your options and obligations with regards to the CCUA, as soon as possible. Examine your payroll procedures, and begin considering the tax consequences of providing benefits to civil union partners and same-sex spouses. Review and, if necessary, revise participant forms to reflect the changes required by the CCUA. Pay close attention to the guidance that is expected from federal agencies in the upcoming months regarding the changes to DMA. Keep employees informed of the changes in the law, and their effect on your employee benefit plans.

30 Questions?