New Hampshire Civil Unions
George L. Chimento
December 17, 2007
A new relationship in New Hampshire
The Civil Union law enacted this spring takes effect in New Hampshire on
January 1, 2008. New RSA 457-A provides:
NH civil unions will only be recognized if they are between couples of the same
sex. The parties must be at least 18 and cannot be close relatives (a bit more
strict than the state's heterosexual marriage law, which permits girls of 13 and
boys of 14 to marry with parental consent, and allows grandparents to marry
grandchildren). A licensing process is required through NH Town Clerks.
This article is meant to help employers understand rights and obligations in the
workplace. It does not address knotty issues which confront same-sex couples
moving to NH from other states, and NH same-sex couples who may already have
married in Massachusetts or Canada. Generally, these marriages or unions will be
respected, and will not have to be renewed under NH procedures. A good
summary of legal issues has been prepared by GLAD (Gay & Lesbians Advocates &
Defenders). A thorough cross reference to NH laws which are affected has been
compiled by the New Hampshire Freedom to Marry Coalition. A useful multi-state
analysis (not updated for NH yet) was prepared by the firm of McGuire Woods.
Employers should be aware that this legislative victory was bittersweet, at best,
for the NH gay community. Although NH civil union partners were granted the
same NH rights (and are now subject to the same obligations) as married couples,
there is anger that civil unions were not called marriages. GLAD observes that
"Civil unions do not bestow the dignity and respect by society that marriage
does." Gay advocates also fear that NH civil unions will not have the same respect
in other jurisdictions, simply because the relationship is not defined as "marriage."
The conflicts with Federal law
Whether the relationship is called a "civil union" or a "marriage," there is a conflict
with federal law. The Federal Defense of Marriage Act ("DOMA") expressly defines
"marriage", for purposes of interpreting federal statutes, as a union between a
man and a woman. A same sex spouse, or a same sex partner in a civil union,
cannot be a "spouse." Accordingly, NH civil union partners must still file separate,
not joint, federal tax returns. And benefits provided to civil union partners may be
taxable to employees, for federal purposes, as "fringe benefits." (See Section 6 at
the end of this article for more detail on tax imputation.)
New Hampshire employers face the same exercise as their Bay State counterparts,
after the Massachusetts Supreme Court declared same-sex marriage to be a right
under the state constitution. Goodridge v. Dept. of Public Health, 798 N.E.2d 941,
Mass. 2003. New Hampshire employers must examine each employee benefit plan
and workplace mandate, such as ERISA, COBRA, FMLA, and HIPAA, that mention
When a plan or federal rule says "spouse", and the NH Civil Union law extends
spouse-like rights and obligations to same-sex individuals, NH employers will
have to determine: (1) what is the required course of action, (2) what are the
alternatives, and (3) what is the best policy for the workplace.
Let's make the employer's job a little more complicated. ERISA sets out an
exclusive federal scheme for the administration of employee benefit plans. State
laws are overruled, but there is an important exception when plan benefits are
delivered through insurance policies. Insurance is regulated by State law. ERISA
recognizes that, and defers to State law requirements as they relate to insurance.
This means, for example, that a health plan delivered through a New Hampshire-
approved insurance policy will have to cover civil union partners. A self-insured
plan is permitted to cover partners, but is not required to do so. In fact, a self
insured plan would not even have to cover heterosexual spouses, because ERISA
does not mandate any eligibility requirement for health insurance.
Sponsor obligations for benefit plans.
An employer (or the joint board of a Taft-Hartley plan) in New Hampshire should
make the following six (6) determinations for each of the sponsored Plans:
1. Does ERISA cover the Plan?
2. Does the Plan use products regulated by State insurance laws (such
as life insurance, Blue Cross and HMO coverage, or group annuities)?
3. Is there a definition of "spouse" in each Plan and summary plan
description ("SPD") and how will the Plan Administrator interpret the term after
December 31, 2007?
4. Are there other benefits and payroll practices, such as COBRA, HIPAA, and
FMLA leave, which are observed solely due to federal law ?
5. Should the definition of "spouse" be amended in the ERISA Plan and
SPD documents to clarify that civil union partners are (or are not) to be treated as
"spouses?" Should other employer documents, such as Policy Manuals
and COBRA disclosures, be revised ?
6. If civil union partners are to be covered, what is the proper way to impute
federal taxable income to the employee?
Let's examine the 6 questions more closely.
1. Does ERISA cover the Plan?
ERISA covered Plans are of two types:
(1) "welfare benefit" (i.e. major medical, dental, Section 125 medical
reimbursement accounts, group life, severance and disability), and (2) "pension
benefit" (i.e. 401(k), employer-sponsored 403(b), profit sharing, SEP-IRA, defined
benefit, or money purchase). Executive "top-hat" plans, which usually make a one-
time filing with the Department of Labor for exemption from most ERISA
requirements, are still considered to be covered by ERISA.
ERISA does not cover (1) governmental and workmen's compensation plans, or (2)
Plans of churches and church-controlled entities, except for retirement plans which
opt to be covered, or (3) offshore plans for non-resident aliens, or (4) "excess
benefit plans", which gross up employee pensions that are otherwise limited by
Internal Revenue Code ("Code") limits. Generally, individuals' rights under these
non-ERISA plans will be determined by the plan documents, the Internal Revenue
Code, when relevant, and the laws of the State or foreign jurisdiction.
2. Does the Plan use products regulated by State insurance laws
(such as life insurance, health insurance or HMO coverage)?
After cataloguing the Plans, a Sponsor should then determine whether
insurance products are used. As mentioned, ERISA does not preempt State laws
regulating insurance products. The use of stop-loss insurance, which protects
Sponsors of self-insured plans from large claims, will not convert a plan from self-
insured to insured status, according to a US Department of Labor interpretation.
A typical Sponsor offers both insured and non-insured Plans, such as insured long
term disability, insured group life and ad&d, and may offer insured group medical
(through an indemnity arrangement, HMO, or network). Typically, a 401(k) plan is
non-insured. Section 125 medical expense reimbursement accounts, funded with
voluntary salary deferrals, are non-insured.
3. What is the definition of "spouse" in each Plan and summary plan
description, and how will the Plan be interpreted after December 31, 2007 ?
Civil union partners are not "spouses" under RSA 457-A. The statute offers them
the right to be treated like "spouses" but specifically does not grace the
relationship with the status of marriage. So what does a plan mean when it
provides "spouses" certain rights, and when the definition (if any) of "spouse" was
written before the new law? Consider two examples.
401(k) Example: Widget Co. sponsors a 401(k) plan which defines spouse as a
"lawful spouse.” The Plan says that a spouse must consent to the naming of a non-
spouse beneficiary for death benefits. An employee forms a NH civil union with a
same-sex person and does not change his beneficiary form, which names brothers
and sisters. The civil union partner never consents to the naming of others, and
the employee dies. The civil union partner says that he or she is entitled to the
same rights as a “lawful spouse.” The brothers and sisters respond that they are
the named beneficiaries. Who gets the money ?
Answer: If the Plan defined "spouse" as a spouse under DOMA, the civil union
partner would lose any challenge. Absent a specific definition, it is up to the Plan
Administrator to determine what the term "spouse" in the Plan document means.
Because a NH civil union partner is not a "spouse" under NH law, he or she would
probably lose in litigation. Litigation might not have happened, however, if the
Plan (or a policy statement) made clear whether a civil union partner was to be
treated as a "spouse."
Recommendation: Because some qualified plan rules (like minimum distribution
requirements under IRC 401(a)(9), which refer to spouses' ages) can only apply to
DOMA spouses, it will generally be less confusing if tax-favored retirement plans
(like 401(k) and employer sponsored 403(b)) adopt a rule which uses a DOMA
definition. This does not take away any meaningful right of employees, who can
still name civil union partners as beneficiaries. Defined benefit plan sponsors
should also consider whether the plan offers a subsidized joint and survivor form
of payment for spouses, and pay special attention to "excess benefit plans" (which
supplement ERISA plan benefits, but which are not governed by ERISA and
therefore covered by NH law).
Health Plan Example: An employee wants to cover his civil union partner under
the self-insured medical plan of his employer. The Plan Administrator refuses the
enrollment and says ERISA (and DOMA) do not require enrollment. The summary
plan description has an expansive definition of "spouse," saying the term will be
defined by the law of the employee's residence.
Answer: The summary plan description language is enforceable under ERISA. The
fact that it could have been amended to use a specific federal (DOMA) definition is
irrelevant after a claim is filed. Even with the definition in this example, the New
Hampshire civil union partner would still have an uphill fight, because he or she is
not termed a "spouse" but only has spouse-like rights.
Recommendation: It's certainly easier for the sponsor of a self-insured plan to
cover only heterosexual (DOMA) spouses. The federal rules described below -
COBRA, FMLA, and HIPAA - all extend rights only to DOMA spouses. And there is no
need to impute extra taxable income when only the DOMA rule applies.
Still, ease of administration should not be the driving consideration. An employer
could feel that extending coverage is just the right thing to do. If so, plan
definitions and literature must address employee rights under the related statutes
as well as under the Plan. And a method of imputing federal taxable income for the
"fringe benefit" must be selected. (See No. 6, below.)
4. Are there other benefits and payroll practices, such as COBRA and
FMLA leave, which are observed solely due to federal law?
COBRA is a federal statute, so its protections do not extend to civil union
partners. COBRA covers employers with at least 20 employees and applies to
insured and self-insured plans. Self-insured NH employers are required to offer
federal COBRA, so coverage of civil union partners is optional. Presumably, if a self
insured plan is amended to include civil union partners, the sponsor would also
extend similar COBRA-type rights although not required by Federal law.
Like Massachusetts, NH has a "mini-COBRA" law for insured plans and a 39 week
continuation statute RSA 415:18, XVI and VIII that requires insured plans to
extend continuation rights. NH also has recently expanded the rights of divorced
spouses to stay on insured plans for up to three years. Civil union partners can
insist they be treated as spouses under these state laws, but only if the plan is
HIPAA is a federal statute which provides for special enrollment rights after
marriage and relief for new enrollees from preexisting condition limits on
coverage. Like COBRA, it is a federal statute. The extension of HIPAA-type
rights to civil union partners presents issues which are generally the same
as for extending COBRA-type rights.
FMLA covers larger groups (50 or more employees) and mandates 12 weeks
unpaid leave for personal illness or to care for children, spouses, and
parents. Unfortunately, a New Hampshire employer who just wants to treat
everyone the same cannot do so without violating current FMLA regulations.
Example: Sponsor X tells employees that it's OK to take FMLA leave to care
for civil union partners under the same conditions as spouses. Sponsor X
does not know that FMLA regulations say that this leave, which is not for a DOMA
spouse, child, or parent, will not be credited against the 12 weeks required for
FMLA purposes. After taking 12 weeks to care for the civil union partner, the
employee of Sponsor X may then obtain an additional 12 weeks for personal
illness. By trying to be fair, Sponsor X now favors civil union partners over
employees in traditional marriages.
Recommendation: This is one area where employers will probably ignore the
narrow federal regulation and treat civil union partners in the same manner as
heterosexual spouses. See the statements of FMLA policy for the University of New
Hampshire, Indiana University, and the University of Minnesota. DO NOT RELY JUST
ON THIS ARTICLE in forming a FMLA policy in this tricky area.
5. Should the definition of "spouse" be amended in the ERISA Plan
and SPD documents? Should other employer documents, such as Policy
Manuals and COBRA disclosures, be revised?
Anyone who has read this far knows the answer. Employers who have not already
done so should focus on the matter now. A typical New Hampshire Sponsor may
decide that all of this complexity is not worthwhile. Most of its Plans are insured,
so why not just amend the non-insured Plans to give civil union partners equal
Here are some of the considerations that may make this "simple" solution not so
IRS-qualified plans. Code 401(a)(9) distribution rules give federal spouses
special treatment that cannot be extended to non-DOMA spouses and partners
without disqualifying the plan.
Also, many retirement plans these days use "prototype" documents sponsored by
a national vendor. To avoid IRS red tape, the vendors sometimes only permit
employers to amend the adoption agreement, not the underlying definitions in a
thick "basic" document approved by the IRS National Office. Of course, the spouse
definition is in the "basic" document, and the vendor's service center will be
reluctant to change form documents and beneficiary forms.
Section 125 Plans. The typical medical reimbursement account in a Section 125
Plan permits tax free reimbursement only for eligible expenses as defined in the
Code. That means that a Section 125 Plan may not make reimbursements to
a civil union partner on a tax-free basis unless the partner is a Code 105(b)
dependent. (See No. 6, below.) In fact, distributions for persons who are not Code
105(b) dependents would be a violation of the "use it or lose it" principle which
governs Section 125 Plans.
For those 125 Plans which offer Code 129 dependent care benefits, tax-free
reimbursement is allowed for the care of civil union partners who are
"dependents." To keep employers on their toes, the Code 129 requirement is
different than the Code 105(b) test for health insurance. A 125 plan may
reimburse only for the care of a civil union partner who is a "qualifying individual"
under Code 21(b), which requires that the partner be incapable of self-care, and
share a principal abode with the employee for more than 1/2 of the year. A
reimbursement for a civil union partner who is not a "qualifying individual" will
jeopardize the plan's tax status, and cannot be allowed.
6. What is the procedure to impute federal taxable income for health insurance?
Contrary to belief, there is not a tax problem for many employees with civil union
partners who are covered by their employer's health plan. No income will be
imputed to an employee for partner health coverage if the employee (i) has the
same principal abode and resides for the entire year with the partner, and (ii) pays
more than 1/2 of the partner's support. It's not necessary that the dependent be
related by blood, or have restricted income, or be claimed as a tax dependent. This
2004 federal legislation was a crack in the DOMA barrier. It is not well-known, but
absolutely sure. See IRS Notice 2004-79 and IRC 105(b).
How does an employer know if the civil union partner, claimed as a Code 105(b)
dependent, meets the support and residency tests? IRS has ruled in PLR 2003-
39001 that an employer need not withhold income and employment taxes from an
employee who annually certifies that his or her civil union meets the requirements
of Code 105(b). A suggested form of tax affidavit (as in use at Rollins College),
which can be customized for NH civil unions, is attached. Because it will not be
known until the end of the year whether the conditions of Code 105(b) are
satisfied, a prudent employer would advise employees that it is their responsibility
to notify the employer if there is a change in the partner's residence or support
during the year.
In the event that the civil union partner cannot qualify as a Code 105(b) federal
dependent, withholding and taxation on the imputed income are then required.
Frustratingly, the IRS will not announce a bright line test for imputing income.
Instead, it says it will not rule on specific methods, and speaks in Delphic terms
that the fair market value of the coverage is what's taxable. Does this mean that
an employee is taxed on the difference between family and individual coverage?
And, if the employee already pays for family coverage (due to a child who might be
at home or with an ex-spouse), is the additional cost for the partner tax-free?
Undoubtedly, some are taking the view that the benefit should just be taxed
based on the incremental cost to the employee. However, the cost of comparable
single coverage is what must be imputed. For many employers, the easiest is to
refer to the single person COBRA cost (less any 2% surcharge). That is the
approach followed in IRS PLR 2001-08010. Imputing single premium coverage is
also the approach which Massachusetts follows for its employees. If a more lenient
approach were supportable, Massachusetts would most likely have followed it for
same-sex spouses of state employees. A conservative approach also protects the
employee. If medical care (i.e. hospital and doctor costs) for a non-Code 105(b)
dependent is not paid for with after-tax dollars, it is taxable.
New Hampshire employers will expend a great deal of effort in wading through all
of this. The problem lies with the federal government, and its relative inaction
since 1974 when ERISA was enacted. The original purpose of ERISA was to
establish uniform rules for the delivery of benefits, with a limited exception to
permit states to regulate insurance. The social debate between traditional and
same-sex relationships was not foreseen at the time.
We have a federal system which provides different tax rules for people, depending
on their approach to marriage. The result is a big mess in the workplace, where
employers, especially those who do business in many states, need uniform rules.
However, until a law is passed that divorces the concept of marriage from the
delivery of health insurance and benefits, employers will just have to figure out the
rules and administer them as fairly as they can.
This article is provided as a courtesy and may not be relied upon as legal advice, or to avoid
taxes and penalties. Distribution to promote, market, or recommend any arrangement or
investment to avoid or evade taxes, including penalties, is expressly forbidden. Any
communication with the author as to its contents, does not, of itself, create a lawyer-client
relationship. Under the ethical rules applicable to lawyers in some jurisdictions, this may be
the parties who enter into a civil union ....shall be entitled to all the
rights and subject to all the obligations and responsibilities provided
for in state law that apply to parties who are joined together
pursuant to RSA 457. (the NH statute governing heterosexual