Although the Supreme Court’s ruling on June 26 to legalize same-sex marriage in all 50 states will result in many new benefits for same-sex couples, it may cause some initial headaches for small businesses.
The ruling could affect company benefits and human resources policies. As a result, benefits providers and small businesses alike are struggling to figure out what to do. It’s not completely clear yet what small businesses will be obligated to do legally, and some policy decisions may be at your discretion.
“I think everyone is learning this together in a community environment,” says Josh Stoffregen, director of global communications and LGBT project lead at Prudential Financial. “There should be some personal responsibility in LGBT individuals, but it would be great steps for small-business owners and plan sponsors to be proactive.”
Your old benefits policies may need revising
It’s important to look at your benefits policies, especially those related to eligibility, to ensure they’re compliant with the new rules, recommends Jon Kessler, CEO of HealthEquity, one of the country’s largest health savings account custodians. Prudential’s financial checklist for same-sex married couples can give you an idea of what types of benefits may need updating.
One of the biggest ones to consider is health care.
“Any small business that offers spousal health care or family health care to their heterosexual married employees will want to look into doing the same thing with their same-sex married employees — otherwise, they’ll probably find themselves in potential legal trouble around discrimination of benefits,” says Justin Nelson, CEO of the National Gay and Lesbian Chamber of Commerce.
It’s not just health care benefits at stake, however. “If you’re an employer being proactive, [you] have to recognize same-sex spouses on your assigned benefit plans and defined contribution plans,” Stoffregen says.
This includes recognizing same-sex spouses on retirement plans, he says.
While legal requirements are still being sorted out, Nelson says it’s not just a matter of being right with the law. Offering the same benefits to all employees, regardless of sexual orientation or gender identity, “is something every business should live by if they want to attract and maintain the best talent in a competitive marketplace.”
Consider ending domestic partnership benefits
Before gay marriage was legal, some businesses offered domestic partner benefits for employees who couldn’t marry. Now that all same-sex couples can wed, Kessler recommends reviewing and possibly dropping domestic partnership benefits in favor of spousal benefits. Doing so could simplify your HR processes.
“I suspect a lot of firms will want to return to the bright line of ‘if you’re married, you get spousal benefits; if you’re not, you don’t,’” Kessler says.
You need to communicate with your employees
Since it’s hard to know how much of your workforce is affected by the Supreme Court’s ruling, Kessler encourages employers to communicate clearly with their staff about what’s changing. This also ensures anyone affected feels free to come forward to ask questions or update their benefits.
“Set an environment that says we recognize this decision, we intend to do everything we can … and we’ll get to work on it,” Kessler says.
He says that showing the desire to do the right thing benefits employers in several ways: It helps people feel safer in the workplace, regardless of gender or sexual orientation; it’s smart from a liability perspective should any discrimination claims later surface; and it helps you prioritize benefits and start helping affected employees right away.
Educate employees on updating benefits elections
If your state previously didn’t recognize same-sex marriage, it’s possible you have employees who previously wed in a state that allowed it. The Supreme Court ruling requires all states to recognize same-sex marriages, even if it happened in another state.
Your business will have to decide if these newly recognized marriages count as a life event to make benefits changes outside of open enrollment (Kessler says there hasn’t been any consensus on this yet).
Alerting gay and lesbian employees of their now-married status is especially important if they have been treating themselves as singles for benefits. Let employees know they’ll have to reevaluate their benefits. Also, aim to help them understand the ramifications of switching their status to married, Kessler says.
One change for previously unrecognized same-sex couples is the loss of a beneficial loophole: Prior to this ruling, Kessler says, same-sex couples were often covered as a family for insurance purposes, but each person was considered single for tax purposes. This meant they could contribute to two individual maximums to investments like HSAs, which equates to a higher contribution than the family maximum. Once they’re considered married for taxes, those couples have to abide by the family contribution maximums.
If you’re unsure what changes you need to make or what to communicate to your employees, reach out to your benefit plan sponsors or benefits broker to see if they can offer guidance. An attorney can also assist you.
Bonus tip: LGBT-owned businesses also benefit
If you’re an LGBT business owner and co-own the business with your same-sex partner, Nelson says this ruling can put some of your worries at ease. “In states where marriage previously wasn’t legal, we will see some equalization in terms of survivorship,” he says.
That’s because if something happened to one of the partners, it wasn’t uncommon for the other to be left fighting for his or her half of the business, he says. Now, following the Supreme Court decision, “we’ll see some of that dissolve as we see this shakeout and states come to terms with marriage.”
For more information on being an LGBT-friendly business, visit our LGBT financial planning page. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @emstarbuck.
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