On June 26, 2013 the Supreme Court ruled that Section 2 of the Federal Defense of Marriage Act (DOMA) was unconstitutional. On August 29, 2013 the IRS further ruled that as a result of this ruling, same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as “married” for federal tax purposes. They have also clarified that this holds true even if they later move to a state where same-sex marriage is not recognized.
What does this mean for our participants?
The medical and dependent care flexible spending accounts (FSA/DCA) are federally regulated tax savings accounts. This ruling now allows a participant to submit expenses incurred to cover expenses for their same-sex spouse that was previously ineligible. What is not yet clear however is if this new ruling is a qualifying event to change their election.
For the Health Reimbursement Arrangements (HRA) this new ruling now allows those same pretax benefits to be extended to spouses of the same-sex. Previously any benefit received would have been given on a taxable basis.
The IRS has also stated that an individual affected by this ruling is able to but not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.
What does this mean for our employer groups?
The IRS has stated in Rev. Ruling 2013-17 that a premium for medical coverage of same-sex spouses is now able to be deducted on a pretax basis from the employee. The IRS has also stated that they intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses.
Questions and Answers:
The IRS also issued Rev. Ruling 2013-17 along with two sets of Answers to Frequently Asked Questions (FAQs) that provided additional guidance for employers. The first set of FAQs addressed issues surrounding employer sponsored benefits for same sex couples found here. The second set of FAQs deals with questions for registered domestic partners and individuals in civil unions found here. HRCTS will continue to notify our clients and partners of any further changes and/or finalized requirements as they become available.
Please note that this message is for informational purposes only. It is not intended as legal advice. Please consult your own Attorney or Tax advisor.