For a legally married couple who live in a state where same-sex marriage is recognized:
- Employers with self-insured welfare plans (meaning benefits are paid out of the company’s general assets) may not have to extend spousal-benefit coverage to same-sex spouses, because federal law does not require spousal welfare-benefit coverage and because state insurance law mandates do not apply to self-insured plans. However, employers that continue to provide benefit coverage only to opposite-sex spouses “are almost certain to face legal challenges under federal discrimination law," Solomon advised.
- Employees will no longer have to pay federal income taxes on the income imputed for an employer’s contribution to a same-sex spouse’s medical, dental or vision coverage. And workers can pay for same-sex spouses’ coverage on a pretax basis under a Section 125 plan.
“The above rules only apply to same-sex spouses who were married in and live in a state where same-sex marriage is legal,” Solomon clarified. “The big open question is what happens to same-sex spouses who live in states such as Florida or Texas," which don't recognize same-sex marriages. “No one can answer the question until additional guidance is issued. It is possible that the answer can vary for different purposes—for example, state of residence will likely carry the day for tax filing and imputed income purposes, but it is possible the IRS could say that 'state of celebration' governs for pension plan purposes. In the meantime, it appears that employers can choose either approach, but it will be imperative to amend plans to add clear plan language to document the employer's approach.”...
Retroactive Benefits
Another question is whether employees can claim benefits retroactively—for instance, seeking past tax relief for spousal health care benefits—if they've been married to their same-sex spouse in a state that recognizes same-sex marriage. Solomon observed: “It is certainly not clear yet, but I would think employees should be able to amend tax returns for open years to claim refunds. And employers should be able to get refunds of FICA taxes for prior open years.”
Retroactivity “is one of the most important practical questions facing employers and plan sponsors” following the DOMA ruling, added Joanne Youn, an ERISA and benefits law attorney at Caplin & Drysdale in Washington, D.C. “While the court did not specifically address retroactivity broadly, the decision arose out of a claim for refund of estate taxes paid by a same sex-spouse in a prior tax year. The IRS has authority under existing law to grant relief from retroactivity; however, even if it were to do so, its authority would not extend to other statutes affecting employee benefits, such as ERISA.”
The decision references the fact that “over 1,000 federal laws contain provisions specifically applicable to spouses that may be affected and should be coordinated,” Youn noted. “Therefore, I would expect that additional guidance will be issued in the coming months.”
Deferring to State Law
Rita F. Lin, a partner at Morrison Foerster in San Francisco, said that many federal laws governing spousal benefits do not contain a statutory definition indicating which law governs whether an individual is “married.”...
