Q&A for Employers: Understanding the Impact of Illinois' New Civil Union Act
Q: What Is the Purpose of the Civil Union Act?
A: Effective June 1, 2011, the Illinois Religious Freedom Protection and Civil Union Act (commonly referred to as the Civil Union Act) serves two purposes: (1) to "provide adequate procedures for the certification and registration of a civil union" and (2) to "provide persons entering into a civil union with the obligations, responsibilities, protections and benefits afforded or recognized by the law of Illinois to spouses."
Q: Why Should Employers Pay Attention?
A: In essence, the Civil Union Act ensures that civil unions and marriages are treated identically under Illinois law. Accordingly, the Civil Union Act has broad implications for Illinois employers.
Q: How Does the Civil Union Act Affect Insurance Plans?
A: All insured medical, dental and vision insurance policies written in the state of Illinois and issued on or after June 1, 2011 must conform to the Civil Union Act, and all policies in force as of that date are deemed amended to conform. This means that for any such policies, if an employer offers coverage to an employee's spouse, the employer also must offer identical coverage for an employee's civil union partner. In addition, if the employer offers coverage to the children of a married couple, the employer must also offer identical coverage to the children of an employee's civil union partner, even if they are not the biological or adopted children of the employee.
Q: What Are the Enrollment Rules?
A: Employers must allow participating employees to add their civil union partners during open enrollment or a 30-day special enrollment period, which must begin as follows:
June 1, 2011 for civil unions previously entered into in another state, but now recognized in Illinois;
As of the civil union effective date for newly formed civil unions; or
After a civil union partner loses other coverage.
Coverage for civil union partners must become effective at the beginning of the month following enrollment.
Q: Does the Civil Union Act Affect Self-Funded Plans?
A: Because such plans are subject to federal law—namely ERISA—the Civil Union Act does not apply to self-insured plans offered by private employers. This is because the federal Defense of Marriage Act (DOMA) defines "marriage" as a "legal union between one man and one woman as husband and wife," and the term "spouse" as "a person of the opposite sex who is a husband or a wife." DOMA does not recognize same-sex marriages or civil unions, and accordingly, the Civil Union Act does not apply to benefits provided by federal law (such as private employers' self-funded health benefits or retirement plans).
As just one example, while a civil union partner and his or her children are not entitled to continuation coverage under COBRA (a federal law), they are entitled to coverage under Illinois' continuation laws. As a result, an employer with 20 or more employees that previously familiarized itself only with the requirements of COBRA must now gain an understanding of the various Illinois continuation statutes, including the Illinois Spousal Continuation Law and the Illinois Dependent Child Continuation Law.
Q: Are There Tax Issues Employers Need to Be Aware Of?
A: Civil union partners are not eligible for the same tax exemptions as married couples with respect to employer-sponsored insurance coverage. Because Illinois follows the same model as the federal tax code, benefits such as health, dental and vision insurance coverage are not tax-free under state or federal law for civil union partners and their children. Accordingly, employers must impute income for any employer-sponsored health coverage provided to a civil union partner who is not the employee's tax dependent.
Q: Can an Employer Require an Employee to Furnish Evidence of a Civil Union?
A: Because Illinois law does not allow discrimination on the basis of sexual orientation, an employer can require an employee to provide evidence of a civil union only if the employer requires evidence of marriage from married couples.
Q: What Action Should Employers Take to Comply with the Civil Union Act?
A: First, employers should decide what benefits they want to provide and to whom. Self-insurance may be an option for employers that do not want to provide benefits to civil union partners and their children. However, employers should be aware that taking such a step may be viewed unfavorably by employees, job candidates and business partners.
Second, employers should review their benefit plans and programs, as well as policies and procedures, to ensure that they comply with the Civil Union Act.
Third, employers should keep in mind the tax impact of coverage provided to civil union partners and their children, and work together with their payroll service and financial advisors to address imputed income and tax withholdings.
Finally, employers should work with their insurance and legal advisors to provide written notice to employees of the new special enrollment rights afforded by the Civil Union Act.