Two days, two decisions: How the recent Supreme Court rulings impact group benefits

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In June we saw some big news in health care with the Supreme Court’s decisions to uphold subsidies and overturn the same-sex marriage ban.  Below is a quick review of the decisions and how they will impact employers and their group benefits:

Decision 1: Subsidies in the federal exchange upheld. On June 25, 2015, the Court decided individuals and families who have enrolled in Healthcare.gov (the federal exchange) can continue to receive subsidies to help with the cost of their health insurance plans. The decision was a big win for the ACA and welcome news for the approximately 6.4 million people who have bought coverage through a federally-run exchange. While it isn’t the end of the ACA’s legal battles – there’s the health insurance tax, upcoming Cadillac tax, definition of full-time employee, and wellness program rules – employers can now focus on the reporting requirements that began this year and must be reported in early 2016. See last week’s article for more details and our new 2016 Employer Reporting Requirements Guide.

Decision 2: Same-sex marriage ban overturned. The very next day on June 26, 2015, the Supreme Court overturned the same-sex marriage ban that remained in four states. That means health benefits and tax treatment must now be the same for all legally married couples. Most benefits administrators and human resources managers are applauding the decision, saying it will simplify the administration of benefits by finally providing some consistency.

The ruling should simplify things for employers too. Domestic partner benefits may no longer be necessary since marriage is now open to all couples. Some employers may choose to offer spousal benefits under a common umbrella, while others may choose to continue offering coverage to both same-sex and opposite-sex domestic partnerships.

The Supreme Court decision is also a relief to employers who have same-sex-partner employees or spouses living or working in states that didn’t recognize same-sex marriage, since those employees must all be treated uniformly now regardless of where they live or work. Employers will need to modify their group benefits enrollment processes and create or modify consent and eligibility forms to cover same-sex spouses in states where they weren’t previously covered.

Here are a few other considerations for employers:

  • The court ruling could have an administrative impact on 401(k) plans with respect to transactions that require consent of a spouse, such as when a plan participant changes the named beneficiary on his or her plan. The ruling is also expected to affect how married same-sex couples apply for Social Security benefits.
  • State income tax treatment of employer-provided benefits could change for employees with same-sex spouses.
  • Eligibility rules for employer-provided group benefits could change and open up eligibility to same-sex spouses in all states.

Bottom line: employers need to carefully review their group benefit plans in light of the latest Supreme Court decisions and decide how best to design those plans to stay compliant and attract the best talent.

Need help with your group benefits and HR compliance? Contact the experts at BeaconPath today.

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