By Amanda Sonneborn and Sam Schwartz-Fenwick.
Last month, in U.S. v Windsor, the Supreme Court struck down the definition of spouse contained in the Defense of Marriage Act. The Defense of Marriage Act defined “spouse” to refer only to opposite-sex spouses. While Windsor struck down the definition of spouse, it did not answer how the term spouse should be defined for purposes of the 1,000 federal laws that give rights and benefits a to “spouse.” Many practitioners wondered if courts would wait for the executive branch to issue new regulations regarding spousal definitions under the various federal laws before courts began to interpret Windsor. A recent decision, Cozen O’Connor v. Tobits, from the Eastern District of Pennsylvania demonstrates, however, that at least one court is not waiting for executive guidance before applying Windsor to various federal laws that provide rights and benefits to spouses.
In Tobits, an Illinois employee participated in a profit-sharing plan sponsored by her Pennsylvania based employer. In 2004, the employee lawfully married her same-sex partner in Canada. The employee died in 2010. Both the employee’s widow and the employee’s parents sought death benefits under the plan in the form of a pre-retirement survivor annuity.
The plan defines a spouse as a person to whom the participant has been married for at least a year at the time of their death, and provides that a surviving spouse shall be entitled to receive a death benefit equal to the pre-retirement survivor annuity. The plan also provided that it was to be construed and enforced in accordance with the Internal Revenue Code, ERISA and Pennsylvania state law.
ERISA mandates that plans offer spousal survivor benefits. The issue the court faced was whether this mandate extends to same-sex couples. The court stated that prior to Windsor, “spouse” referred only to opposite-sex spouses. Post-Windsor, however, “the term ‘Spouse’ is no longer unconstitutionally restricted to members of the opposite sex, but now rightfully includes those same-sex spouses in ‘otherwise valid marriages.’”
The Court then analyzed whether Plaintiff’s marriage was “otherwise valid.” The court noted that the couple had a lawful marriage in Canada, and further noted that the couple’s home state of Illinois considers a same-sex couple a “spouse.” It thus concluded that Plaintiff was entitled to the death benefits she sought.
It should be noted that the Tobits court’s analysis of the term “spouse” under ERISA, may face challenge by other courts. Windsor did not change how the term spouse is defined for purposes of federal law except to clarify that the definition could not be restricted to opposite sex couples. Windsor did not modify the spousal definitions contained in the regulations that underlie ERISA. The Internal Revenue Code regulations which underlie ERISA do not explicitly address whether spouse is determined based on a whether the state in which a couple lives recognizes the marriage (the domicile rule) or whether the jurisdiction in which they were married recognizes the marriage (the ceremony rule). As a practical matter the IRS generally applies a domicile rule. Under the domicile rule the Plaintiff and her wife were note spouses. Illinois, where Plaintiff and her wife resided, does not extend marriage rights to same-sex couples wed in other jurisdictions. Rather, in Illinois a same-sex couple with a valid marriage license is considered a party to a civil union. ERISA does not discuss survivor benefits for parties to a civil union. It only addresses the benefits owed to surviving spouses. As ERISA is silent on extending spousal benefits to non-spouses, and as the IRS’ general rule is to determine spouse based on state of residence not the location of the wedding, a clear reading of ERISA leaves no question that a different court may not find a plaintiff similar to the Tobits plaintiff to be a surviving spouse for purposes of ERISA.
Nonetheless, Tobits is important for employers as it demonstrates that post-Windsor courts will entertain claims for retroactive survivor benefits brought by couples who prior to Windsor were not deemed spouses for purposes of ERISA. Moreover, the Obama administration is in the process of crafting regulations to take into account the Windsor decision. It is possible that these regulations will adopt a rule of ceremony. The effect of such a ruling would that a same-sex couple will be considered spouses under ERISA, regardless of where they reside, so long as they have a valid marriage license from a jurisdiction that recognizes same-sex unions. We will continue to monitor the regulatory and judicial efforts to address the effect of the Windsor decision and update you as further developments arise.