On July 30, 2019, Governor Newsom of California signed into law SB30, which amends California Family Code criteria to register a domestic partnership. A “domestic partnership” is defined as “two adults who have chosen to share one another’s lives in an intimate and committed relationship of mutual caring.” Under current law1, in order to register a domestic partnership with the Secretary of State, the domestic partnership must meet the following criteria:
Neither person is married to someone else or is a member of another domestic partnership with someone else that has not been terminated, dissolved, or adjudged a nullity; and
The two persons are not related by blood in a way that would prevent them from being married to each other in this state; and
Both persons are at least 18 years of age (except in the case of certain court orders); and
Both persons are capable of consenting to the domestic partnership; and
Either of the following:
(A) Both persons are members of the same sex; or
(B) Both persons are of opposite sexes and one or both of the persons are over 62 years of age.
Under the changes enacted by SB30, the last criterion above is eliminated effective January 1, 2020, opening up domestic partner registration to opposite sex couples who are under age 62.
Why is Registration of a Domestic Partnership Significant for Fully-Insured Health Plans?
California enacted its domestic partnership registry in 1999, with limited benefits for registered domestic partners, such as hospital visitation rights. These rights were enlarged little-by-little over the next few years until 2003, when registered domestic partner rights in California were greatly expanded by establishing the presumption that registered domestic partners would have all of the rights and responsibilities given to spouses under state law (with certain exceptions). In 2004 the California Insurance Equality Act was passed (and later amended under the Insurance Nondiscrimination Act effective in 2012). Accordingly, group health care plans and health insurance policies marketed, issued or delivered to a California resident must provide that a registered domestic partner has the right to be covered under the fully-insured health plan to the extent that such plan or policy provides for coverage of a spouse. These rights do not apply to domestic partners whose relationship is not actually registered with the California Secretary of State.
This means that for the last 16 years opposite sex domestic partners under age 62 have not had a right to the same group health plan coverage as a spouse, same sex domestic partners, or opposite sex domestic partners age 62 or older. It should be noted that some employers have chosen over the years to offer coverage to domestic partners regardless of registration status.
All of this is not without some added complexity for employers, specifically with regards to substantiation of the relationship (employers may not ask for documentation regarding a registered domestic partnership that they do not ask for regarding a marriage) and taxation. For state tax purposes registered domestic partners are treated the same as a spouse, resulting in the exclusion of employer and employee contributions for health coverage from income. However, federal law does not recognize domestic partnerships, registered or not, and therefore for federal income tax purposes employee premium payments for domestic partner group health plan coverage must be made on an after-tax basis and employer contributions for domestic partner coverage result in imputed income to the employee.
What Does this Change Mean for Fully-Insured Health Plans?
This broadening of the criteria for registration of domestic partnerships in California means that effective January 1, 2020, fully-insured health plans will need to extend registered domestic partner coverage to all opposite sex registered domestic partners. Because opposite sex registered domestic partners under age 62 will not be able initiate registration of their partnership with the California Secretary of State until January 1, 2020, there may not be an immediate effect to group health plans on day one, but as these domestic partnerships are registered under the new criteria, employers will likely see an increase in employees wanting to add their newly-registered domestic partner and the registered domestic partner’s dependents to the health plan coverage mid-year.
This means that:
Employers should be prepared to discuss this issue at open enrollment or through other employee communications prior to the beginning of the 2020.
Plan documents, wrap documents, summary plan descriptions, and other benefit communications that discuss the criteria for a registered domestic partnership should be updated to reflect the new criteria.
Procedures for taxation issues should already be in place for existing registered domestic partners with group health plan coverage, so from a systems perspective this should not require new methods, but a review of payroll systems is always a good idea.
Self-insured health plans are not generally required to cover registered domestic partners under the principle that application of the state law is pre-empted by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and indeed the law is crafted to apply specifically to insurers who market, issue or deliver health insurance policies to a California resident. But where self-insured health plans have elected to cover registered domestic partners, the same action items will apply.
California employers with any group health plan may get questions from employees regarding this change and its effect on available coverage. In addition, it is an opportunity for group health plan sponsors to review their understanding of, and compliance with, the requirements for registered domestic partner coverage in California.
¹ California Family Code Section 297.
If you have any questions about the domestic partner coverage, please contact a Boutwell Fay attorney.
© Boutwell Fay LLP 2019, All Rights Reserved.This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us.The information contained in this article is effective as of September 30, 2019.