September/October 2017 Issue

Also in this issue: Department of Labor Overtime Rule Halted     |     Court Rejects Claim that Right-to-Work Law Is an Unconstitutional Taking     |     Wisconsin Court of Appeals Clarifies Municipal Authority to Issue Raze Orders     |     City of Madison Kicks Off 100% Renewable Energy Resolution Efforts

Budget Bill Eliminates Domestic Partnership Benefits

Steve Zach | 10.20.17

The 2017 – 2019 Wisconsin state budget (Act 59) eliminated the state’s domestic partnership registry. The stated purpose for the change was that the legalization of same-sex marriage made the legal status of domestic partners duplicative and if a person involved in a domestic partnership wanted to secure various legal benefits, including those arising from an employment relationship, the avenue to do so would be through marriage.

Act 59 also made changes to statutory provisions that permitted domestic partners of municipal employees to access various insurance and other employee benefits through private plans and plans sponsored by the State of Wisconsin Department of Employee Trust Funds (ETF). Municipalities should review their plans to determine if any changes need to be made.

Act 59 amended Chapter 40 to preclude any insurance plan administered through ETF (health, life, duty disability, supplemental benefits, and long-term care) from providing coverage to domestic partners. WRS death, life insurance, and deferred compensation benefits will continue to be paid pursuant to the most recent, valid beneficiary designation on file with ETF, including domestic partners. If there is no designation on file, life insurance death benefits will be paid to an employee’s registered, surviving domestic partner according to standard sequence. Duty disability benefits which begin prior to January 1, 2018 will be paid to a domestic partner, but not benefits that begin after that date. ETF sent out a letter to its participating municipalities further explaining the impact of Act 59. It can be found at: http://​etf​.wi​.gov/​p​u​b​l​i​c​a​t​i​o​n​s​/​e​t​7​3​8​5.pdf.

For those municipalities which maintain employee benefit plans not provided through ETF, Act 59 amended Chapter 66 to preclude a ​“local government unit” from providing hospital, surgical, and other health and accident and life insurance to domestic partners. A ​“local government unit” is defined by statute to include a ​“political subdivision of this state, a special purpose district in this state, an agency or corporation of a political subdivision or special purpose district, or a combination or subunit of any of the foregoing.” This includes school districts, counties, cities, villages and towns. The Chapter 66 amendments also provide that a local government unit may not provide benefits to domestic partners under an ​“employee benefit plan” as defined by 29 USC §1002 (3) of ERISA. This would generally include flexible spending account benefits, long-term disability benefits (unless funded as a payroll practice), AD&D coverage, group term life insurance coverage, and any health plan benefits (e.g., major medical, dental, prescription drug, or vision).

The Chapter 66 changes not only impact contractual plans, but also municipal employment policies that come within the definition of an ​“employment benefit plan” under ERISA. Examples include post-retirement sick leave conversion provisions that provide for the payment of health insurance premiums to beneficiaries after the death of the retiree or parts of Section 125 plans. The Chapter 66 changes prohibit the payment of these types of benefits to domestic partners. Therefore, municipalities will want to review their policies with legal counsel to determine if any changes are required.

The Act 59 changes become effective at different times:

The changes to ETF-sponsored plans become effective January 1, 2018. ETF is taking steps to modify their plans to terminate domestic partnership coverage as of that date. 

The Chapter 66 changes are effective the seventh month after publication (April 2018), but first apply to any benefit contract in place that covers domestic partnerships at such time as that contract expires or is terminated, extended, modified or renewed. This timing is dependent on the plan year renewal date or the date of any mid-contract changes which occur after April 1, 2018. Thus, if a municipality has a health insurance plan in place on January 1, 2018 with a renewal date of January 1, 2019 that covers domestic partners, Act 59 first impacts the plan as of January 1, 2019 to require removal of domestic partner coverage. Municipalities that have collective bargaining agreements with protective services bargaining units would be able to change coverages under those agreements to coincide with the timing of changes made to non-represented coverage because municipalities are able to change plan design without bargaining those changes with the collective bargaining unit.

Municipal employment policies that provide a non-contractual ​“employee benefit plan” are subject to Act 59 as of April 1, 2018 and municipal policies must be changed by that date.

Municipalities should confer with their plan sponsors (ETF or otherwise) and legal counsel to set in motion the changes necessitated by Act 59, including amending plan eligibility provisions, providing appropriate COBRA notices, addressing open enrollment issues, amending employment policies, and appropriately communicating any changes to their employees.

— Steven C. Zach