Civil Unions in Illinois – What Does It Mean For Your Employee Benefit Plans?

Contributed by Rebecca Dobbs

The Illinois Religious Freedom and Civil Union Act (IRFCUA) took effect on June 1, 2011.  Although the law adds a few wrinkles to existing equal employment opportunity laws, already recognized sexual orientation as a protected class.  Therefore, the most significant impact on employers will be in the employee benefits arena. 

Generally, the Employee Retirement Income Security Act (ERISA) is a federal law that serves to preempt state laws affecting employee benefits.  In other words, in the realm of employee benefits, federal law trumps state law.  However, ERISA does not preempt states from issuing laws that affect and govern insurance.  Accordingly, states can issue laws that regulate insurance which indirectly affects those employers who sponsor insured plans.

IRFCUA mandates that “[a] party to a civil union is entitled to the same legal obligations, responsibilities, protections, and benefits as are afforded or recognized by the law of Illinois to spouses, whether they derive from statute, administrative rule, policy, common law, or any other source of civil or criminal law.” 

Thus, where an employer maintains an insured health plan (versus a self-insured plan) and that plan allows for coverage of spousal dependents, the plan is required to extend the same coverage to an employee’s civil union partner. 

Keep In Mind

  • Federal law and state law do not currently mandate coverage of spousal dependents but the majority of plans allow employees to enroll their spousal dependents. 
  • For insured plans, employers will need to amend their health plans to include civil union partners and modify enrollment and other plan-related materials accordingly.
  • Continuation coverage provided under federal law, the Consolidated Omnibus Reconciliation Act (COBRA), will not be affected by the state law.  Accordingly, civil union partners will not be entitled to continuation under COBRA. 

That said, Illinois Continuation Law and Illinois Spousal Continuation Law, which affect insured plans regardless of size, will apply to civil union partners.  Illinois Continuation Law can operate to provide continuation up to a period of 12 months where an employee is terminated or experiences a reduction in hours. 

  • Under Illinois Spousal Continuation Law, a civil union partner will be eligible to continue coverage up to two years when benefits are lost due to divorce from the employee, death of the employee or retirement of the employee. 
  • When a civil union partner is over the age of 55, Illinois Spousal Continual Law can potentially provide him or her with the ability to continue coverage until eligible for Medicare when the qualifying event relates to divorce, death or retirement.  Plan documents and qualifying event notices will need to be changed accordingly.

Benefits provided to civil union partners will not be taxable for Illinois state income tax purposes.  However, civil unions are not recognized under federal law for purposes of federal income tax considerations.  As a result, employers will have to calculate the fair market value of the coverage provided to an employee’s civil union partner and count it towards the employee’s total taxable wages when determining the appropriate federal income tax to withhold. 

Non-government retirement plans such as 401(k) plans are regulated solely by federal law – private employers will not be required to extend spousal benefits to employees in regard to federally-regulated pension benefits and retirement plans.

Action Steps

  1. Thoroughly review and assess all benefits currently being provided to determine which, if any, require amending. 
  2. Any necessary changes to communication materials and plan documents will need to be addressed. 
  3. Tax ramifications must be taken into consideration.