On June 26, 2015, the U.S. Supreme Court ruled that the United States Constitution requires all states to recognize marriages regardless of the partners’ gender. How will this decision impact small businesses in states that have not already approved same sex marriages? Here are few of the issues that will impact businesses that have employees who are married to a spouse of the same sex, and companies that are owned by one spouse or both spouses of a same-sex couple.
(See Update message #1) There are several issues related to employee benefits that will change—some for technical, compliance, regulatory or administrative purposes; others for practical or “new-reality” reasons. (Look for future posts as these and other employee relations issues are clarified by such federal agencies as the IRS).
According to the benefits consulting firms Aon Hewitt, here are examples of how the decision may impact employee benefits:
Changes for Employers
- Employers may need to make administrative changes to cover same-sex spouses in states where they were not previously covered. For example, employers will need to modify enrollment processes and create or modify consent and eligibility forms.
- The state income tax treatment of employer-provided benefits could change for individuals with same-sex spouses. While further guidance will be needed, it will eventually be unnecessary for employers to continue to calculate imputed income.
Changes for Workers
- Eligibility rules for employer-provided benefits could change, which would open up eligibility to same-sex spouses in all states. In contrast, employers might discontinue same-sex domestic partner benefits, if all employees are able to marry in their state. Employees should check with their employer about any possible changes to their benefits or necessary administrative steps they may need to take to ensure coverage.
- With anticipated changes to the state income tax treatment, workers with same-sex spouses covered by employer plans will no longer need to pay imputed income on those benefits.
An end to “domestic partner” benefits?
Previously, to extend certain benefits to couples in states who couldn’t legally wed, some companies provided “domestic partner” benefits. Many companies may opt out of that offering, streamlining their benefits (and costs) to only cover spouses–now that all people have equal access to marriage. Other companies may continue to provide such a benefit for competitive reasons.
Gay-owned businesses become family businesses
The Supreme Court decision means same-sex married couples now own jointly a family business even if they are not technically business partners. While pre-nuptial agreements, company charters and estate laws of a state will govern precisely what the “family business” designation means for specific couples, in general, it means that the surviving spouse can take ownership of the percentage of the business his or her spouse controlled.
For same-sex couples who also jointly own a business, any estate laws that led to “next-of-kin” disputes between a surviving business partner and the family of the deceased partner will be equivalent to the laws governing male-female married couples.
Still a divisive issue for many
While the Supreme Court’s decision establishes the law of the land, the Washington Post reports that same-sex marriage opponents will seek ways to oppose it in much the same ways the opposition has continued to such rulings as Roe v. Wade or cases related to prayer in school or other religious freedom issues.
In some cases, this could come in the form of “second-order resistance.” For instance, citizens may not be able to stop a same-sex marriage, but an opponent who owns a bakery could refuse to bake wedding cakes or provide services for the reception, according to the Post.
A reduction in the federal deficit
Here’s a surprise. A decade ago, the bi-partisan Congressional Budget Office, estimated annual savings of $100 million in Supplemental Social Security Income (means-tested payments to low-income elderly and disabled), $300 million in Medicaid and $50 million in Medicare, if the U.S. allowed same-sex marriage in all 50 states. Why? Because the combined earnings of the same-sex married couple would put them above the earnings limit, and thus make them ineligible for the supplement.
The Affordable Care Act, which creates another means-tested entitlement, will also see its costs reduced by same-sex marriage for the same reason.
(Source: Fox Business News)
Great savings for some businesses
For businesses with operations in multiple states that have had different laws related to same-sex marriage, the ruling means that such differences will disappear. Because employers have had to set up and manage separate systems to manage benefits and calculate taxes in multiple states, uniformity in state marriage laws will save employers a bundle — about $1.3 billion, according to one analysis, according to Kiplinger.com.
A business niche that is going to benefit directly from the Supreme Court decision
The Wedding Industry is a big winner in this Supreme Court decision. More gay couples are expected to walk down the aisle than ever before–good news for the wedding industry, which has struggled amid years of sinking marriage rates. According to UCLA’s Williams Institute, the wedding industry, comprised primarily of small businesses, could grow by $2.6 billion after the decision.
Update #1: This post was updated on June 27, 2015, to include more details related to employee benefits.
(Photo: Josh via Flickr)