July 17, 2020

New Supreme Court ruling may affect employee benefit plans

As you probably already know, the Supreme Court issued several important decisions during this year’s term. One of the most ground-breaking was their decision in Bostock v. Clayton County holding that Title VII of the Civil Rights Act of 1964 protects transgender, gay and lesbian employees from workplace discrimination based on their sexual orientation or sexual identity. You can find the decision here: https://www.supremecourt.gov/opinions/19pdf/17-1618_hfci.pdf

While Bostock applied to the termination of a LGBT employee, we should carefully consider its potential impact on employee benefit plans.  To get a sense of where this rapidly evolving nondiscrimination law may be headed, this blog post provides of a snapshot of the legal framework prior to Bostock and some specific considerations for benefit plan professionals after Bostock.

Pre-Bostock background:

As you may recall, in 2016 the HHS issued nondiscrimination regulations under Section 1557 of the ACA that generally prohibited discrimination on the basis of race, color, national origin, sex, age or disability under health programs or activities that receive HHS funding. These regulations interpreted Section 1557 to prohibit discrimination “on the basis of sex” to include discrimination based on transgender status, gender identity or gender expression in healthcare to include certain health plans.

But just this June, HHS issued revised the Section 1557 nondiscrimination regulations and significantly changed the prior regulations. Importantly, the regulations repealed the prior regulations that defined discrimination “on the basis of sex,” to include discrimination based on gender identity. Further, these new regulations made clear that Section 1557 does not apply to employer-sponsored group health plans that do not receive HHS funding and are not principally engaged in the business of providing healthcare.

Post-Bostock considerations:

Now that the U.S. Supreme Court has ruled that employers violate Title VII (of course, different and separate from 1557 under the ACA) when they discharge employees based on sex, the impact that this decision could have on employee benefit plans remains to be seen. It is clear that employers should use caution when considering benefit plan provisions that may treat employees differently based on sex, including their sexual orientation or transgender status. At a minimum, special care should be made to review relevant plan/coverage terms, including those pertaining to gender dysphoria, gender-affirmation surgery or mental health benefits, as well as plan terms covering same-sex spouses and same-sex domestic partners.

Please let us know if you have any questions.

Brian Beatty is a transactional attorney whose practice involves the representation of clients in the representation of public, private, nonprofit and governmental employers of all sizes in the design, implementation, operation and administration of qualified retirement plans and health and welfare plans.

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