First, congratulations to everyone who can now legally experience what is the best thing about my life, marriage. A quick shout of support for those still fighting on this front. Second, over a month ago, Section 3 of the federal Defense of Marriage Act (DOMA) was ruled unconstitutional. This means that a marriage legally performed in any state must be recognized at the federal level. You may have considered what this means for your friends and employees affected, but have you considered what this means for your compensation plans?
Let’s be honest, when it comes to a showdown between personal freedom and your compensation documents, documents are always the higher priority! In this case, you need to review every plan, agreement, SPD and communication for the term “spouse”. You also need to review the same for every possible euphemism that has been created to avoid using the word spouse. For every instance you will need to determine, with your legal counsel, what needs to be done.
How will beneficiary forms be modified? Will you need new information (immediately)? What happens in a divorce or QDRO? How do your programs define family for FMLA purposes? What about expat tax equalization? Do your programs change now that some of your employees have spouses?
Paul Chestovich of Maslon discussed some of the SEC regulations that public companies must follow. Beneficial ownership under Section 16 of the Securities Exchange Act of 1934 may now require you to report on newly deemed “spouses”. Paul mentions issues with Rule 144, Forms S-8, accredited Investors and more. What about the transactions performed prior to the ruling? What needs to be done? How do you reach out to your staff and require them to give you information on spouses in a way that is both efficient and non-invasive?
Many private companies require a spouse to sign stock agreements for both purchased and awarded stock. If an individual was married prior to the recent ruling, does this mean that these forms may have been incorrectly completed?
Have there been transfers of stock options that meet the spousal tax requirements? Do you have retirement programs that allow spouses to participate, even pre-death? Do you have employees working in a state where marriage is recognized and living in a state where it isn’t? Will this impact who can be transferred within your organization? I won't even get into insurance and benefit plans.
Obviously, there are far more questions than answers right now. Luckily, July and August are traditionally two of the slower months for compensation professionals. We have the time to read, review, discuss, modify and make these plans work for our newly lucky employees and for our already time-strapped compensation teams.
What have you already done? What do you still need to do? Let’s build a comprehensive list on the comments section.