On Dec. 16, the IRS issued clarifications on how the U.S. v. Windsor ruling on same-gender marriage affects the administration of cafeteria plans, flexible spending accounts and health savings accounts. IRS Notice 2014-1 is in the form of 10 questions and answers regarding midyear election changes, FSA reimbursements and contribution limits for HSAs and dependent care FSAs.
In U.S. v. Windsor, No. 12-307 (June 26, 2013), the U.S. Supreme Court found section 3 of the Defense of Marriage Act unconstitutional. That section provided that for purposes of federal tax law, marriage meant only the legal union between a man and a woman. As a result, employers could not permit employees to elect coverage of same-gender spouses on a pre-tax basis under a cafeteria plan unless the spouse otherwise qualified as a tax dependent of the employee.
Subsequently, the IRS issued guidance to explain how the Windsor ruling affects federal tax law in Revenue Ruling 2013-17, the agency noted that:
- The terms spouse, husband and wife include individuals married to a person of the same sex if lawfully married under state law.
- The IRS recognizes all valid same-gender marriages, even if the couple is domiciled in a state that does not recognize same-gender marriages.
- Same-gender marriage does not include individuals in a registered domestic partnership, civil union or similar formal relationship.
The IRS also issued guidance (Notice 2013-61) to help employers made claims for tax refunds or credits on employment taxes they overpaid on benefits provided to employees’ same-gender spouses. The latest IRS guidance goes into more specifics about how the ruling affects cafeteria plan administration.
It may be difficult for most employers to keep up with the flurry of agency guidance on the issue of benefits for same-gender couples, particularly as employers deal with benefits questions that still remain unanswered, and inconsistent treatment in different states. Not understanding how this rapidly-changing area affects your organization can have real legal consequences. During a Dec. 18 webinar, attorney Todd Solomon, one of America’s top experts on benefits for same-gender couples, will clear the federal-state confusion so employers can answer employee questions and keep everything from benefits to tax reporting correct and compliant. There is still time to register.