DOMA Ruling Affects ERISA

Washington, DCA recent ruling by the US Supreme Court regarding the Defense of Marriage Act (DOMA) will have some effect on employees who are covered by ERISA laws. The ruling, which saw the Supreme Court strike down DOMA as unconstitutional, means people in same-sex marriages who live in states where same-sex marriage is legal will be eligible for federal benefits, such as those provided by ERISA. Although the ruling will affect who is covered by ERISA, it is not expected to substantially increase benefits costs for employers.

The Defense of Marriage Act made it illegal for the federal government to recognize same-sex marriages, despite some states recognizing such marriages. As a result, same-sex married couples were not eligible for coverage under federal benefits. The Supreme Court’s ruling only affects people in states where same-sex marriage is legal, and only applies to federal benefits. Furthermore, individual companies that do not currently offer benefits to same-sex spouses are not forced to change their policy, according to CFO (6/26/13).

The Employee Retirement Income Security Act (ERISA) is one of the federal laws affected by the Supreme Court’s striking of DOMA. ERISA sets minimum standards for how pension plans run in the private industry are managed. One of the standards of ERISA is whether spouses have a right to part of the employee’s pension in the event that the employee dies. ERISA also sets out what is required of plan fiduciaries, and requires plans to provide adequate, regular information to plan participants.

ERISA laws protect plan participants to ensure plans are run in an ethical manner and employees are given vital information about their plans. When ERISA laws are violated, employees or the state can file a lawsuit to recover money lost as a result of that violation.

In May, an ERISA lawsuit brought by Ohio Attorney General Mike DeWine resulted in a settlement worth more than $150 million. That settlement, reached with defendants Fannie Mae and KPMG, alleged the firms issued false and misleading financial reports that artificially inflated the value of Fannie Mae’s securities. Originally, plaintiffs sought $6 billion in damages, but the lawsuit was sent to a mediator, who negotiated a settlement for $153 million.

The lawsuit is Federal National Mortgage Association Securities, Derivative and “ERISA” Litigation, 04-cv-01639, US District Court, District of Columbia (Washington).