Colorado is the ninth state to enact civil union legislation and on May 1, 2013, the Colorado Civil Unions Act (the ?Act?) took effect. ?The Act authorizes any two unmarried adults to enter into a civil union, regardless of gender. ?Colorado employers are encouraged to familiarize themselves with the Act, and how it interacts with federal law, which does not recognize civil unions, to avoid costly errors moving forward.
What does the Act say?
Generally, the Act requires that the rights, privileges, and responsibilities given to spouses under Colorado state law also apply to couples in civil unions. ?However, although Colorado state law now acknowledges and protects same-sex civil unions, federal law does not. ?As a result, any federal law governing employee benefits will likely preempt the Act, forcing Colorado employers to comply with both state and federal laws that take different approaches to employee benefits.
How does an employer know what law governs its plan?
If your plan is governed by the federal Employee Retiree Income Security Act of 1974 (?ERISA?), the Act will have no impact on your plan.
The following is a brief summary of the Act?s impact on various employee benefit plans:
- Health and Life Insurance Benefits
- Health insurance policies and life insurance policies, issued in Colorado, are required to offer same-sex civil union partners the same coverage as spouses. However, group health insurance plans are not required to allow civil union partners to be enrolled until January 1, 2014, or the first renewal after that date, if later.
- Self-insured health plans covered by ERISA are not subject to the Act, so employers with self-insured (ERISA) plans may choose whether or not to include civil union partners under their health plans.
- Most governmental and church health plans are exempt from ERISA and, therefore, are likely subject to the Act.
- Programs governed by the Internal Revenue Code, which is a federal law, are only available to spouses as defined by federal law. Therefore, health reimbursement arrangements, health savings accounts, and flexible spending accounts, remain available only to ?traditional? spouses.
COBRA and Colorado Continuation
Because federal law does not recognize same-sex civil unions, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) group health plan continuation does not apply. ?However, employers in Colorado who extend COBRA-like continuation coverage to civil union partners under state law will be affected. After January 1, 2014, these employers must offer civil union partners continuation coverage under the Colorado continuation provisions.
Family and Medical Leave Act
If an employer is subject to the FMLA (i.e., generally 50+ FTEs), the Act does not require coverage of FMLA benefits be accorded to civil union partners, though employers may do so voluntarily. ?If an employer is not subject to FMLA, but provides a similar type of leave as a benefit to its employees of its own volition, under the Act, that benefit would need to extend to civil union partners.
The Act requires all state, local and municipal retirement plans, including the Colorado PERA, local firefighter and police pensions, and other retirement plans maintained by governmental employers, to offer the same benefits to civil union partners that are offered to spouses. ?These benefits include any survivor benefits.
The Act does not require private, non-governmental employers with qualified retirement plans to extend spousal benefits to civil union partners, because those plans are governed by ERISA. ?Employers may choose, however, to treat civil union partners the same as spouses.
A Note About Taxes
Because federal law does not recognize same-sex civil unions, the Act is clear that Colorado will continue to follow the federal tax rules, meaning that same-sex civil union partners cannot file joint tax returns. ?Importantly, this also means that civil union partners who receive benefits will likely have those benefits taxed as imputed income.
What Employers Should Do Next
Because the interaction of state and federal law is complex, employers are encouraged to undertake a review of their current benefits plan to determine the extent of the Act?s passage on your organization?s benefit policies. ?To the extent that policies, beneficiary forms, and/or benefit plan summaries require updating, immediate action should be taken.
Colorado?s law is typically viewed as applying to same-sex couples. However, the Act is actually written in gender-neutral terms. ?Therefore, employers must be aware that a civil union partnership could be comprised of one man and one woman, as well as same-sex couples.