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The Impact of Marriage Equality on Stock Plans

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July 10, 2015 | Jennifer Namazi

The Impact of Marriage Equality on Stock Plans

On June 26, 2015, the Supreme Court ruled in Obergefell v. Hodges that all states must permit marriage between same sex couples and all states must recognize marriages performed in other states, including those of same sex couples. In essence, marriage is now simply marriage for all. What impact does this ruling have on your stock plans? I'll cover that in today's NASPP Blog.

Back in Time

While the Obergefell decision has been described a landmark one, the real mechanical impact to stock plans arrived two years earlier - in June 2013. In deciding the case of U.S. v. Windsor,  the Supreme Court ruled that Section 3 of the Defense of Marriage Act was unconstitutional. The result of that decision was that same-sex couples recognized as married under the laws were they live were considered married for federal purposes. See the NASPP Blog "The Supreme Court and Stock Compensation" (July 18, 2013) for more information on that case.

The Obergefell decision has resulted in marriage equality in all states. However, the Windsor decision in 2013 sparked several changes to employee benefits in states where same sex marriages were recognized. According to a FAQ on the topic, "While the Obergefell decision was a more significant societal landmark, the Windsor decision had a bigger impact on stock plans. It led companies to look through benefit plans and policies, as well administrative procedures, for situations where marital status matters. As a result, companies had already made many changes even before the Obergefell ruling in June 2015. Among more than 1,000 federal laws and regulations touched by the rulings are those which affect the design and administration of employee benefit plans. In short, spousal provisions in employee benefit plans should treat same-sex spouses and opposite-sex spouses in the same way. While stock plans are not affected by federal laws in the same way as qualified retirement plans (e.g. a 401(k) plan) or health and welfare plans, the changes that will be required in these other benefit plans will probably lead to similar modifications in stock plan documents."

What Now?

While much of the groundwork was already laid in the Windsor decision, there are still several things companies need to consider in ensuring their benefits and stock plans are consistent in application to an employee's spouse:

  • Ensure benefit and stock plans are consistent in their definition of "spouse" and any other related terms.
  • The above is true for any practices, policies and procedures in place that refer to a spouse. Examples may include policies on divorce, policies on transferability of stock options, and beneficiary designations.
  • Companies may take the existence of "domestic partner or same sex partner" benefits under review since same sex couples are now permitted to marry in all states.

In addition, the SEC and IRS have already clarified that same sex couples who are legally married are considered to be a spouse, husband or wife regardless of where they live. That guidance stands after the Obergefell decision.

While there are some housekeeping items to be done to ensure companies are not consistent in their application the definition of "spouse", "husband" and "wife", I don't expect it to be a significant time commitment or development in terms of far reaching implications to stock plans.

Additional Resources FAQ: Are Stock Options Affected by the Supreme Court's Decisions on Marriage Equality?

SEC Guidance on "Spouse" and "Marriage"

IRS Revenue Ruling 2013-17

IRS Notice 2014-19




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