A Social Security cost-of-living adjustment could have a small but positive impact on retirement planning.
June 27--Insurance benefits that were available only to man-woman married couples are now open to same-sex couples as a result of Wednesday's U.S. Supreme Court decision to strike down the Defense of Marriage Act.
A person in a same-sex marriage who has health insurance through an employer and provides coverage to a spouse will no longer be taxed for the employer's contribution to that spouse's health coverage --one of several examples of how same-sex marriages will benefit financially and otherwise by having the same federal recognition as a marriage between a woman and man.
The ruling changes how people will shop on health insurance exchanges this fall as part of federal health care reform, sometimes called Obamacare.
As part of federal health care reform, people can qualify for federal subsidies as individuals or families when they buy health insurance on a public exchange, which is an online marketplace for health coverage.
The U.S. Supreme Court decision will allow families of a same-sex couple to qualify for a family subsidy when buying insurance coverage on a health exchange, said State Healthcare Advocate Victoria Veltri.
Separately, the ruling opens up eligibility for Medicaid coverage to same-sex families, rather than requiring the couple to qualify as individuals and cover their biological children separately, Veltri said.
Many questions remain about the decision's affect on more than 1,000 federal laws that mention "marriage" or "spouse."
For example, if a couple is legally married in one of the 12 states that has gay marriage, will health insurance benefits apply if they move to a state that doesn't allow gay marriage?
It's also not clear when the law takes effect and whether it will be retroactive with regard to the taxes. If a person in a same-sex marriage has a portion of his paycheck withheld because the employer-funded portion of health coverage for his partner is taxable, at what point will the health benefits be tax free as they are for an opposite-sex couple?
"I suspect the phones are going to start ringing now," Veltri said. "For all those reasons, guidance [from federal officials] is really critical."
It's not just health insurance. The court's decision also affects retirement plans and annuities.
For example, annuities will be less complicated.
The ruling removes a conflict between federal tax law and state laws in states where same-sex marriage is legal, said Jack Dolan, a spokesman for the American Council of Life Insurers, a trade group. The conflicting state and federal laws recognized same-sex couples as spouses in annuity contracts, but it did not provide those spouses with the same federal tax benefits that go along with being a spouse, Dolan said.
"This comes into play for issues such as determining the timing of when a beneficiary will be taxed on benefits he receives upon the death of the spouse," Dolan said. "Today's ruling removes this conflict and clarifies a number of issues in states where same-sex marriage is legal. ... The ruling allows life insurers to recognize marriages of same-sex couples in administering their retirement plans and other insurance contracts in those states. This is significant because federal tax benefits under such plans and contracts are only provided to legally recognized spouses."
Already on Wednesday, some federal agencies clarified that a person in a same-sex marriage will be entitled to the same benefits as a person in a marriage between a man and woman.
Among those federal agencies is the Department of Defense.
"The [defense] department will immediately begin the process of implementing the Supreme Court's decision in consultation with the Department of Justice and other executive branch agencies," U.S. Defense Secretary Chuck Hagel said in a prepared statement. "The Department of Defense intends to make the same benefits available to all military spouses -- regardless of sexual orientation -- as soon as possible. That is now the law and it is the right thing to do."
The Connecticut Insurance Department says the Supreme Court's ruling does little to change state insurance laws in Connecticut, which has had legalized same-sex marriage since 2008.
"The benefit to Connecticut residents will be to clear the conflicts with federal law relating to tax benefits, annuity beneficiaries and spousal eligibility for federal programs," said department spokeswoman Donna Tommelleo. "The federal government would be responsible for clearing those conflicts."
The property-casualty industry of auto and home insurers isn't affected by the ruling, said Robert Hartwig, an economist and president of the Insurance Information Institute, which is a property-casualty research entity funded by insurers.
"Sexual orientation is not an underwriting factor and insurers have long since, for many many years, issued policies to couples that are same-sex, opposite-sex, to people that are roommates, to inter-generational relationships and this will continue," Hartwig said.
A number of cities and businesses signed an amicus brief in the Supreme Court case, saying that the Defense of Marriage Act imposes compliance burdens on employers, and that it forces employers to incur administrative burdens and expenses they would not otherwise have if same-sex marriages were recognized as legitimate.
Among the municipalities, financial institutions, medical centers, health care providers, energy companies, insurers and other companies that signed the amicus brief are the city of Hartford; Aetna; American International Group, Inc. or AIG; Boehringer Ingelheim USA Corp.; Diageo North America Inc.; Liberty Mutual Group Inc.; Pfizer Inc. and many others.
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