Illinois' Civil Union Act

A civil union is a legally recognized relationship governed by the Civil Union Act. Under Illinois law, a civil union may be entered by same-gender couples or different-gender couples. The Civil Union Act provides that civil unions may be entered into by: 1) two individuals who are not closely related (whether by blood or adoption); 2) who are over age 18; and 3) who are not currently married or in a civil union or other similar legal relationship. Individuals who are currently in domestic partnerships will not, however, automatically be treated as civil union partners, even if they already meet the requirements noted above.

Civil union partners must complete an application and obtain a state license from a county clerk's office in order to enter into an Illinois civil union. A civil union license is valid for 60 days, and is only valid in the county in which the license is obtained. Judges, certain public officials, or religious officials may perform civil union ceremonies. However, religious orders are free to choose whether or not to solemnize or perform civil unions.

The Civil Union Act requires that civil union partners be treated identically to married spouses. It provides that this requirement should be “liberally construed and applied to promote” the Act's principle of equality. Couples that enter into Illinois civil unions are eligible to receive nearly all of the benefits offered to different-gender spouses under Illinois law, including certain family law rights and responsibilities, medical and death-related rights, and various other rights and obligations.

Health Insurance

Application of Civil Union Act

Because the Civil Union Act requires civil union partners to be treated identically to married spouses, if an employer's health plans are subject to Illinois law (and not to the requirements of ERISA), any benefits provided to married employees under those plans must also be extended to employees who have entered into civil unions. According to guidance issued in May, 2011 by the Illinois Department of Insurance (the DOI), all insurance policies (including health insurance policies and/or HMO contracts) in effect on June 1, 2011, were automatically amended by operation of law to conform with the Civil Union Act. Health insurance policies issued in Illinois on or after June 1, 2011, must also comply with the requirements of the Civil Union Act.

Under the DOI guidance, employers offering health benefits to their employees through group health insurance policies and/or HMO contracts issued in Illinois must offer civil union partners and their families the same coverage offered to married couples. That is, if an employer's health insurance provides for coverage of an employee's spouse, it must also provide coverage for an employee's civil union partner. Likewise, if the policy provides for coverage of a spouse's children, it must also provide such coverage to the civil union partner's children. The rates charged for two-person (spousal) or family coverage cannot differ based on whether the family consists of married spouses or civil union partners.

Because State regulation of self-funded health plans is preempted by ERISA, the Civil Union Act does not require employers maintaining such plans to extend spousal or dependent benefits to employees in civil unions. Such employers may, however, voluntarily provide coverage for their employees' civil union partners and their children.

When may civil union partners be added to a plan? Under certain circumstances, an employee may be eligible to add his or her civil union partner to an Illinois employer's insured health plan immediately. If the Civil Union Act applies to the employer's insured group health plan, and if the plan provides for the coverage of spouses, then an employee may add coverage for his or her civil union partner: 1) during the plan's annual open enrollment period; or 2) during the 30-day “special enrollment period” beginning when the employee's civil union becomes effective or when the employee's civil union partner loses other coverage. In addition, employees who entered into same-gender marriages, civil unions, or other such relationships in other States prior to June 1, 2011, were eligible to enroll their civil union partners during a 30-day special enrollment period beginning on June 1, 2011.

Proof of Civil Unions

An employer or insurer that is subject to the Act cannot impose more stringent requirements on its employees or policyholders to prove that they have entered into an Illinois civil union than the employer or insurer would require to prove that a marriage exists. For instance, an insurer could not require that an individual show that the individual and his or her civil union partner maintain joint bank accounts, own real estate together, or provide other similar evidence as proof of the couple's civil union, if such evidence is not required from married spouses.

Continuation Coverage

Due to the operation of the federal Defense of Marriage Act (DOMA), Illinois civil unions are not recognized for federal purposes. As a result, an employee's civil union partner will not have continuation rights under
COBRA in the event the employee loses his or her medical coverage, retires, dies, or divorces the civil union partner. Nevertheless, under certain circumstances, civil union partners may be eligible for continuation coverage provided under Illinois law (through Illinois' “mini-COBRA” program).

Tax Treatment

Illinois civil unions are not recognized for federal tax purposes (again, because of the application of DOMA). Accordingly, the value of any coverage provided to an employee's civil union partner and his or her children will, unless the partner or child is otherwise a federal tax dependent of the employee, need to be included in the employee's gross income, and subject to federal income tax and applicable payroll taxes.

In addition, the value of such coverage also appears to be taxable for Illinois state tax purposes. The Illinois Department of Revenue (the DOR) stated in early July that, for Illinois tax purposes, the value of the health insurance coverage provided to an employee's civil union partner and his or her children must be included in the employee's Illinois gross income. According to the DOR, this is because Illinois uses federal gross income as the starting point for determining Illinois state income tax. Because civil unions are not recognized for federal income tax purposes (due to the operation of DOMA), the DOR has also stated that civil union partners cannot file joint Illinois state tax returns.

Several advocacy groups have argued that the DOR's position on these issues is not in harmony with the spirit of the Civil Union Act, and have urged the agency to correct its stance to comply with the overall principles of the Civil Union Act. However, the DOR believes that the issue can only be corrected through formal amendment of the Illinois Income Tax Act by the state legislature.

Other Insurance Coverage

Life Insurance

Because civil union partners are treated the same as married spouses for purposes of Illinois law, they will be treated as having an “insurable interest” in the life of their partner (that is, they will be treated as having suffered financial or other losses in the event of their partner's death). As a result, a civil union partner may purchase life insurance covering his or her partner's life. Accordingly, if an employer's group life insurance policy permits an employee to purchase life insurance coverage for his or her spouse, an employee must be offered the ability to buy similar coverage for his or her civil union partner.

Long-Term Care Insurance

Under the Civil Union Act, long-term care policies issued in Illinois must provide benefits to civil union partners that are identical to those provided to married spouses. Accordingly, a civil union partner may designate his or her partner as a “spouse” for purposes of spouse survivorship benefits, spouse waiver of premiums, spouse security benefits, spouse-shared care benefits, and other similar benefits offered under a long-term care policy.

Medicare Coverage

Due to the operation of DOMA, civil union partners are not recognized as spouses for purposes of Medicare coverage. As a result, civil union partners with less than 10 years of Medicare-covered employment may not use their partners' employment histories in order to establish eligibility for Medicare Part A.

Retirement Plans

The Civil Union Act does not require non-governmental employers offering retirement plans to their employees, i.e., defined contribution plans (401(k), profit-sharing plans, etc.) and defined benefit pension plans, to provide spousal benefits to civil union partners, since those plans are solely governed by federal law. However, pension funds created by Illinois law, such as pension funds for police officers and firefighters are subject to the Civil Union Act. As a result, civil union partners are entitled to all the same benefits (such as survivor benefits), and are subject to all the same obligations (relating to the length of the relationship), under those funds as are married spouses.

Other Benefit Arrangements and Employee Policies

Given the reach of the Civil Union Act, Illinois employers should keep in mind that other employment policies and agreements, in addition to those discussed above, may be affected. For example, employment contracts that provide benefits to married spouses may also need to provide the same benefits to civil union partners. In addition, leave of absence policies based on the health of a spouse or children, or leaves that are required by Illinois law, may also apply to civil union partners and the children of those partners.

What Employers Should Do Now

Illinois employers should review their benefit plans and employment policies to determine whether benefits currently offered to married spouses must also be offered to civil union partners. If so, the benefit plans (and their summary plan descriptions) and policies should be revised to reflect these new rights. Employers may also want to notify Illinois employees about any special enrollment periods that the employees may have under insured benefit plans. Employers should also keep in mind the tax treatment that will apply for federal and state purposes to the provision of such benefits, and keep watch for any changes to that treatment that may occur in the future. Human resources personnel will need to discuss these new rules with their payroll departments or vendors to ensure that the tax treatment of benefits is being properly managed.

Belinda S. Morgan is senior counsel with Foley & Lardner LLP, where she is a member of the firm's Employee Benefits & Executive Compensation Practice. Ms. Morgan focuses her practice on employee benefits, executive compensation and ERISA issues. She also is involved in the representation of tax-exempt organizations at both the state and federal levels.

The Illinois Religious Freedom Protection and Civil Union Act (the Civil Union Act or the Act) went into effect on June 1, 2011. The Civil Union Act permits both same-gender and different-gender couples to enter into Illinois civil unions. The Act also recognizes as Illinois civil unions same-gender marriages, civil unions, and other similar legal relationships entered into in other states. Illinois is now one of 22 jurisdictions in the United States that extend some form of state-level spousal rights to same-gender couples. Given that the Act has been in effect for over six months, this article provides a review of the Act's provisions and its impact on employers. If you have not yet reviewed your employee benefits plans to determine how they may be impacted the Act, if at all, now is the time to do so.

The Civil Union Act gives individuals entering into civil unions most of the same protections, obligations, responsibilities, and benefits afforded to different-gender spouses under Illinois law. Because these rights and protections extend to certain employee benefit plans and policies, Illinois employers need to understand how the Civil Union Act will affect their plans' operations.

Illinois Civil Unions, Generally

A civil union is a legally recognized relationship governed by the Civil Union Act. Under Illinois law, a civil union may be entered by same-gender couples or different-gender couples. The Civil Union Act provides that civil unions may be entered into by: 1) two individuals who are not closely related (whether by blood or adoption); 2) who are over age 18; and 3) who are not currently married or in a civil union or other similar legal relationship. Individuals who are currently in domestic partnerships will not, however, automatically be treated as civil union partners, even if they already meet the requirements noted above.

Civil union partners must complete an application and obtain a state license from a county clerk's office in order to enter into an Illinois civil union. A civil union license is valid for 60 days, and is only valid in the county in which the license is obtained. Judges, certain public officials, or religious officials may perform civil union ceremonies. However, religious orders are free to choose whether or not to solemnize or perform civil unions.

The Civil Union Act requires that civil union partners be treated identically to married spouses. It provides that this requirement should be “liberally construed and applied to promote” the Act's principle of equality. Couples that enter into Illinois civil unions are eligible to receive nearly all of the benefits offered to different-gender spouses under Illinois law, including certain family law rights and responsibilities, medical and death-related rights, and various other rights and obligations.

Health Insurance

Application of Civil Union Act

Because the Civil Union Act requires civil union partners to be treated identically to married spouses, if an employer's health plans are subject to Illinois law (and not to the requirements of ERISA), any benefits provided to married employees under those plans must also be extended to employees who have entered into civil unions. According to guidance issued in May, 2011 by the Illinois Department of Insurance (the DOI), all insurance policies (including health insurance policies and/or HMO contracts) in effect on June 1, 2011, were automatically amended by operation of law to conform with the Civil Union Act. Health insurance policies issued in Illinois on or after June 1, 2011, must also comply with the requirements of the Civil Union Act.

Under the DOI guidance, employers offering health benefits to their employees through group health insurance policies and/or HMO contracts issued in Illinois must offer civil union partners and their families the same coverage offered to married couples. That is, if an employer's health insurance provides for coverage of an employee's spouse, it must also provide coverage for an employee's civil union partner. Likewise, if the policy provides for coverage of a spouse's children, it must also provide such coverage to the civil union partner's children. The rates charged for two-person (spousal) or family coverage cannot differ based on whether the family consists of married spouses or civil union partners.

Because State regulation of self-funded health plans is preempted by ERISA, the Civil Union Act does not require employers maintaining such plans to extend spousal or dependent benefits to employees in civil unions. Such employers may, however, voluntarily provide coverage for their employees' civil union partners and their children.

When may civil union partners be added to a plan? Under certain circumstances, an employee may be eligible to add his or her civil union partner to an Illinois employer's insured health plan immediately. If the Civil Union Act applies to the employer's insured group health plan, and if the plan provides for the coverage of spouses, then an employee may add coverage for his or her civil union partner: 1) during the plan's annual open enrollment period; or 2) during the 30-day “special enrollment period” beginning when the employee's civil union becomes effective or when the employee's civil union partner loses other coverage. In addition, employees who entered into same-gender marriages, civil unions, or other such relationships in other States prior to June 1, 2011, were eligible to enroll their civil union partners during a 30-day special enrollment period beginning on June 1, 2011.

Proof of Civil Unions

An employer or insurer that is subject to the Act cannot impose more stringent requirements on its employees or policyholders to prove that they have entered into an Illinois civil union than the employer or insurer would require to prove that a marriage exists. For instance, an insurer could not require that an individual show that the individual and his or her civil union partner maintain joint bank accounts, own real estate together, or provide other similar evidence as proof of the couple's civil union, if such evidence is not required from married spouses.

Continuation Coverage

Due to the operation of the federal Defense of Marriage Act (DOMA), Illinois civil unions are not recognized for federal purposes. As a result, an employee's civil union partner will not have continuation rights under
COBRA in the event the employee loses his or her medical coverage, retires, dies, or divorces the civil union partner. Nevertheless, under certain circumstances, civil union partners may be eligible for continuation coverage provided under Illinois law (through Illinois' “mini-COBRA” program).

Tax Treatment

Illinois civil unions are not recognized for federal tax purposes (again, because of the application of DOMA). Accordingly, the value of any coverage provided to an employee's civil union partner and his or her children will, unless the partner or child is otherwise a federal tax dependent of the employee, need to be included in the employee's gross income, and subject to federal income tax and applicable payroll taxes.

In addition, the value of such coverage also appears to be taxable for Illinois state tax purposes. The Illinois Department of Revenue (the DOR) stated in early July that, for Illinois tax purposes, the value of the health insurance coverage provided to an employee's civil union partner and his or her children must be included in the employee's Illinois gross income. According to the DOR, this is because Illinois uses federal gross income as the starting point for determining Illinois state income tax. Because civil unions are not recognized for federal income tax purposes (due to the operation of DOMA), the DOR has also stated that civil union partners cannot file joint Illinois state tax returns.

Several advocacy groups have argued that the DOR's position on these issues is not in harmony with the spirit of the Civil Union Act, and have urged the agency to correct its stance to comply with the overall principles of the Civil Union Act. However, the DOR believes that the issue can only be corrected through formal amendment of the Illinois Income Tax Act by the state legislature.

Other Insurance Coverage

Life Insurance

Because civil union partners are treated the same as married spouses for purposes of Illinois law, they will be treated as having an “insurable interest” in the life of their partner (that is, they will be treated as having suffered financial or other losses in the event of their partner's death). As a result, a civil union partner may purchase life insurance covering his or her partner's life. Accordingly, if an employer's group life insurance policy permits an employee to purchase life insurance coverage for his or her spouse, an employee must be offered the ability to buy similar coverage for his or her civil union partner.

Long-Term Care Insurance

Under the Civil Union Act, long-term care policies issued in Illinois must provide benefits to civil union partners that are identical to those provided to married spouses. Accordingly, a civil union partner may designate his or her partner as a “spouse” for purposes of spouse survivorship benefits, spouse waiver of premiums, spouse security benefits, spouse-shared care benefits, and other similar benefits offered under a long-term care policy.

Medicare Coverage

Due to the operation of DOMA, civil union partners are not recognized as spouses for purposes of Medicare coverage. As a result, civil union partners with less than 10 years of Medicare-covered employment may not use their partners' employment histories in order to establish eligibility for Medicare Part A.

Retirement Plans

The Civil Union Act does not require non-governmental employers offering retirement plans to their employees, i.e., defined contribution plans (401(k), profit-sharing plans, etc.) and defined benefit pension plans, to provide spousal benefits to civil union partners, since those plans are solely governed by federal law. However, pension funds created by Illinois law, such as pension funds for police officers and firefighters are subject to the Civil Union Act. As a result, civil union partners are entitled to all the same benefits (such as survivor benefits), and are subject to all the same obligations (relating to the length of the relationship), under those funds as are married spouses.

Other Benefit Arrangements and Employee Policies

Given the reach of the Civil Union Act, Illinois employers should keep in mind that other employment policies and agreements, in addition to those discussed above, may be affected. For example, employment contracts that provide benefits to married spouses may also need to provide the same benefits to civil union partners. In addition, leave of absence policies based on the health of a spouse or children, or leaves that are required by Illinois law, may also apply to civil union partners and the children of those partners.

What Employers Should Do Now

Illinois employers should review their benefit plans and employment policies to determine whether benefits currently offered to married spouses must also be offered to civil union partners. If so, the benefit plans (and their summary plan descriptions) and policies should be revised to reflect these new rights. Employers may also want to notify Illinois employees about any special enrollment periods that the employees may have under insured benefit plans. Employers should also keep in mind the tax treatment that will apply for federal and state purposes to the provision of such benefits, and keep watch for any changes to that treatment that may occur in the future. Human resources personnel will need to discuss these new rules with their payroll departments or vendors to ensure that the tax treatment of benefits is being properly managed.

Belinda S. Morgan is senior counsel with Foley & Lardner LLP, where she is a member of the firm's Employee Benefits & Executive Compensation Practice. Ms. Morgan focuses her practice on employee benefits, executive compensation and ERISA issues. She also is involved in the representation of tax-exempt organizations at both the state and federal levels.