Following the Supreme Court’s 2013 decision in U.S. v. Windsor (in which the Court held that Section 3 of the federal Defense of Marriage Act (“DOMA”) was unconstitutional), one of the questions facing sponsors of tax-qualified retirement plans was whether the plans were required to recognize same-sex spouses on a retroactive basis for purposes of entitlement to spousal benefits. The IRS answered that question in Notice 2014-19, in which it stated that, for tax-qualification purposes, such plans are required to treat same-sex marriages in the same manner as opposite-sex marriages effective as of June 26, 2013 (the date of the Windsor decision). The IRS also clarified that plans could be amended to recognize same-sex marriages prior to that date, but such earlier recognition was not required for qualification purposes.
Last week, the Internal Revenue Service (IRS) issued Notice 2015-86, providing guidance on the application of the U.S. Supreme Court’s decision in Obergefell v. Hodges to qualified retirement plans and health and welfare plans, including cafeteria plans. Importantly, and as expected, the IRS comments in the Notice that it does not anticipate that Obergefell will have a significant impact on the application of federal tax law to employee benefit plans.
On October 21, 2015, the IRS issued proposed regulations to clarify the treatment of same-sex spouses for federal tax purposes. By way of background, in 2013, the United States Supreme Court held in United States v. Windsor that the portion of the Defense of Marriage Act defining marriage as being between opposite-sex partners was unconstitutional. …
On June 26, 2015, the U.S. Supreme Court issued a historic decision in Obergefell v. Hodges, holding that the Fourteenth Amendment’s Due Process and Equal Protection Clauses require states to allow same-sex marriage and to recognize same-sex marriages performed in other states. The decision comes exactly two years to the day from the Court’s decision in Windsor defining “spouse” to include same-sex spouses for purposes of federal law.
As a result of the Court’s decision, the existing 14 state bans on same-sex marriage are invalid, and same-sex spouses are entitled to all of the rights extended to opposite-sex spouses under both federal and state law.
It was announced today that the U.S. Supreme Court will consider two important questions relating to same-sex marriage–whether states are required to allow same-sex marriages within their jurisdictions, and whether states are required to recognize same-sex marriages performed in other states. The decisions are expected to be issued in June of this year.
July 21, 2014
On June 27, 2014, the IRS published a letter outlining the steps taxpayers should take in order to obtain a refund for taxes paid on the value of employer-sponsored health coverage provided to an employee’s same-sex spouse. The letter, originally dated February 24, 2014, is in response to an inquiry from…
As was expected, the U.S. Department of Labor has issued a proposed regulation changing the definition of “spouse” for FMLA purposes in order to protect the FMLA rights of employees with same-sex spouses.
The proposed regulation adopts a “place of celebration” rule, consistent with the current DOL interpretation in the context of other federal laws.…
Shortly after the U.S. Supreme Court ruled (in U.S. v. Windsor) that Section 3 of the federal Defense of Marriage Act (DOMA) was unconstitutional, the IRS announced that same-sex marriages will be recognized for federal tax purposes and provided guidance relating to the impact of Windsor on certain types of employee benefits. At the same time, the IRS left a number of issues open for future guidance for qualified retirement plans.
Last week, the IRS issued Notice 2014-19, clarifying the application of Windsor to qualified retirement plans. This guidance specifically addresses issues concerning the effective date and retroactive effect of the decision as well as the timing of relevant plan amendments. The IRS also published six Frequently Asked Questions (FAQs) that address details such as beneficiary designations in profit-sharing plans, the applicability of choice of law provisions in qualified plans, the application of Windsor to Code Section 403(b) plans, and additional guidance relating to plan amendments.
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.
The Ninth Circuit Judicial Council, an administrative body that reviews decisions of the court’s chief judge, recently weighed in on an issue involving same-sex domestic partner health benefits in the post-Windsor world. The decision is interesting insofar as it relies at least partially on the Windsor decision in awarding “spousal” benefits to an unmarried…