Originally published on Forbes.com Aug 9th, 2013
The law firm of Cozen O’Connor knew their plan had to pay somebody. Thanks to this decision, now they know who it is. It turns out that it was all about DOMA.
I was eagerly awaiting the Supreme Court decision in Edith Windsor’s case. I have been following same sex marriage tax issues pretty closely, since the earliest days of my blog. In case you haven’t been paying attention, Edith Windsor was the heir to her spouse’s estate. They had been married in Canada and their marriage was recognized by the State of New York. There is an unlimited marital deduction for estate taxes, but due to Section 3 of the Defense of Marriage Act, the estate was not entitled to the marital deduction. Ms. Windsor prevailed in the Supreme Court, much to the chagrin of my fellow Son of Xavier, Antonin Scalia. Section 3 of DOMA is unconstitutional.
It’s Not Just About Taxes
Activists in discussing the hardships imposed by DOMA would often say that there were 1,138 rights that opposite sex couples had that were denied to same sex couples. Although the number is probably accurate, being based on a GAO report, it is also a bit exaggerated. The GAO counted up the sections in the US Code where benefits are given based on marital status. Included are Sections 1532, 1534 and 1536 of Title 38. Those sections cover pensions for surviving spouses of veterans of the Civil War, the Indian Wars and the Spanish-American War. Still, there are a lot of non-tax issues covered by DOMA, so we can expect to see quite a bit of litigation that was suspended waiting its outcome to be decided.
An ERISA Case Is Decided
I don’t know if Cozen O’Connor, P.C., Plaintiff v. Jennifer J. Tobits, et al. is the first of the Windsor progeny. It is the first that I have noticed and it is illustrative of the far reaching implications of DOMA being declared unconstitutional. Cozen O’Connor is a law firm that employed Sarah Ellyn Farley. Ms. Farley qualified under the Firm’s Profit Sharing Plan. She died in 2010 which required the plan to pay a Pre-Retirement Survivor Annuity to – somebody.
The possibilities were Jennifer Tobits, who had married Ms. Farley in Toronto in 2006 and Ms. Farley’s parents. One solution would be for Cozen O’Connor to be a sport about it and pay two survivor annuities. They decided not to do that. Instead they filed what is called an interpleader, which is why they end up being the plaintiffs in the case.
Essentially what they are saying is that they don’t have a dog in this fight. They wanted to turn the money over to the Court and let the prospective beneficiaries argue about it. Cozen O’Connor knows it has to be pay somebody, but wants the Court to say whom. Since the Cozen O’Connor plan explicitly incorporated ERISA language in its plan document, the constitutionality of DOMA was critical to the decision.
There can be no doubt that Ms. Tobits is Ms. Farley’s “surviving Spouse” under the Plan in light of the Supreme Court’s decision in Windsor. Ms. Tobits and Ms. Farley were married in Toronto, Canada in 2006, just a year before Edith Windsor and Thea Spyer wed in Ontario. Ms. Tobits possesses uncontroverted evidence of a valid Canadian Marriage Certificate solemnizing that marriage. Ms. Tobits and Ms. Farley celebrated that marriage with another ceremony in Illinois, where the couple lived together until Ms. Farley’s untimely death in 2010. Post- Windsor, where a state recognizes a party as a “Surviving Spouse,” the federal government must do the same with respect to ERISA benefits—at least pursuant to the express language of the ERISA-qualified Plan at issue here. There can be no doubt that Illinois, the couple’s place of domicile, would consider Ms. Tobits Ms. Farley’s “surviving Spouse”—indeed it already has made that specific finding under state law. Windsor makes clear that where a state has recognized a marriage as valid, the United States Constitution requires that the federal laws and regulations of this country acknowledge that marriage. In light of that, this Court finds that Ms. Tobits is Ms. Farley’s “Spouse” pursuant to the terms of the Plan. This finding alone is dispositive of the issue of the proper recipient of Ms. Farley’s death benefits.
A Practical Observation
It appears that this problem could have been entirely avoided if Ms. Farley had designated a beneficiary. If Ms. Farley and Ms. Tobits lived in some other state, it is possible that this case would still be unresolved. Reading about this case might prompt you to look at all the plans and arrangements that you might be involved in that allow you to designate a beneficiary. Make sure that you have done that and it is who you want. It will make life easier for those you leave behind.
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