Same-Sex Marriage

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Prior to the U.S. Supreme Court’s Windsor decision that repealed Section 3 of the federal Defense of Marriage Act (DOMA), same-sex spouses were not recognized as spouses for federal tax and benefits purposes.  In the immediate aftermath of Windsor, the Internal Revenue Service (IRS) issued Revenue Ruling 2013-17, which stated the IRS position that, for federal tax purposes, the term “spouse” now includes legally married same-sex couples regardless of whether their state of residence permits same-sex marriage.  As a result,  the value of employer-provided  health coverage  for a same-sex spouse would no longer be taxable under federal law, and employees could pay for the coverage on a pre-tax basis through an employer’s cafeteria plan.  Employees also could obtain reimbursement for same-sex spouses’ expenses under health care and other reimbursement plans.

On December 16, 2013, the IRS supplemented that guidance with the release of Notice 2014-1, written in Q&A format with examples.  Notice 2014-1 clarifies several issues for plan sponsors and administrators of cafeteria plans, flexible spending accounts (FSAs) and health savings accounts (HSAs).  First, it allows an employer to permit an employee to make a mid-year election change under its cafeteria plan with regard to health coverage for a same-sex spouse.  Second, it provides that an employee may be reimbursed from his or her health care FSA for expenses incurred by a same-sex spouse during the 2013 plan year, even before the date of the Windsor decision (but no earlier than the date of the marriage).  Third, it confirms that a same-sex married couple is subject to the joint limits applicable to married couples under HSAs and dependent care plans.

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…

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 (https://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.

In the first reported ERISA decision post-Windsor, the U.S District Court for the Eastern District of Pennsylvania held (in Cozen O’Connor, P.C. v. Jennifer Tobits) that a same-sex spouse is to be treated as the decedent’s lawful spouse for purposes of entitlement to death benefits under a retirement plan. In reaching its decision, the court relied on Windsor and reasoned that ERISA and the Internal Revenue Code (Code) provide the definition of spouse; ERISA and the Code incorporate valid state law; and, under Illinois’ civil union statute, Illinois recognizes lawful same sex marriages solemnized in other jurisdictions.