DOMA

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Continuing its implementation of the United States Supreme Court decision in U.S. v. Windsor, the Internal Revenue Service (IRS) recently issued Notice 2013-61, which provides guidance for employers to make claims for refunds or adjustments of overpayments of Federal Insurance Contributions Act (FICA) and Federal income tax withholding (employment taxes) for 2013 and prior years with respect to certain fringe benefits and remuneration provided to same-sex spouses of employees.

In Revenue Ruling 2013-17 issued in August, the IRS announced that effective September 16, 2013, for Federal tax purposes, it would recognize same-sex marriages and was adopting a “place of celebration” rule pursuant to which all same-sex couples married in a state or foreign jurisdiction permitting such marriages would be recognized as spouses for federal tax purposes, regardless of their state of residence. It also announced that it intended to distribute streamlined procedures for employees who wish to claim refunds for federal income taxes paid on the value of health coverage to same-sex spouses and guidance for employers who wish to claim refunds for payroll taxes paid on such benefits.

Notice 2013-61 provides these special streamlined administrative procedures. Under these procedures, if an employer that withheld employment taxes for same-sex spouse benefits paid to or on behalf of an employee in the third quarter of 2013 ascertains the amount withheld on those benefits and repays or reimburses the employee for these amounts before filing the third quarter Form 941 (Employer’s Quarterly Federal Tax Return) due on October 31, 2013, an employer need not report these wages and withholding on the third quarter Form 941. If an employer does not repay or reimburse the employee for the overcollected amount before it files the third quarter 2013 Form 941, an employer must report the amount of the overcollection on that return and can use one of two special administrative procedures to make an adjustment or claim a refund.

A few weeks after the Internal Revenue Service (IRS) stated that it will apply a “place of celebration” rule in recognizing same-sex spouses for purposes of the Internal Revenue Code (including with respect to employee benefit plans), the U.S. Department of Labor (DOL) announced today that it too will interpret the term “spouse” as including…

As a result of the U.S. Supreme Court’s decision in United States v. Windsor, 133 S. Ct. 2675 (2013), in which the Court held that Section 3 of the federal Defense of Marriage Act (“DOMA”) was unconstitutional, same-sex marriages will be recognized for purposes of federal laws, protections, and obligations.  Because the Court did not go so far as to require states to permit same-sex marriage or recognize same-sex marriages entered into in other jurisdictions, there are many open issues that require resolution (either through government guidance or the courts) to provide employers with certainty concerning the administration of their ERISA-governed employee benefit plans.

A federal district court in Pennsylvania issued the first reported post-Windsor decision relating to ERISA plan benefits.  As discussed below, the district court concluded that a deceased employee’s same-sex spouse was entitled to a surviving spouse benefit under a profit-sharing plan, even though the couple was married in a foreign jurisdiction (Canada) and resided in a state that does not allow same-sex marriage (Illinois) but recognizes out-of-state same-sex marriages under its civil union law.  Cozen O’Connor, P.C. v. Tobits, No. 2:11-cv-0045-CDJ (E.D. Penn. July 29, 2013).

On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service issued important guidance for employers and employees relating to the impact of the Windsor decision on employee benefit plans. In Revenue Ruling 2013-17, the agencies ruled that a same-sex couple legally married in any jurisdiction will be recognized as spouses by the IRS for federal tax purposes even if the couple resides in a jurisdiction that does not recognize the validity of their marriage. This “place of celebration” rule is welcome news for employers and other benefit plan sponsors, who may now administer their benefit plans in a uniform manner with regard to same- and opposite-sex married couples. (The Ruling confirms, however, that unmarried domestic partners and civil union partners will not be recognized as married for federal tax purposes, whether the partners are the same or opposite sex.). See (http://www.proskauer.com/publications/client-alert/special-alert-for-employers-and-other-benefit-plan-sponsors/) for our Client Alert discussing the impact of Windsor on employee benefit plans.