It has been two months since the release of the U.S. Supreme Court's Windsor decision recognizing same-sex marriage and the guidance on implementing this decision is just beginning. Since Windsor was decided, several district court opinions have been released analyzing other challenges to non-recognition of same-sex marriage by various states. The evolution of the law in this area is just beginning. Here are highlights from some recent pieces of guidance that should be of interest to employers.
Federal Agency Guidance
Internal Revenue Service
Yesterday, the Internal Revenue Service ("IRS") issued Revenue Ruling 2013-17 and two sets of Frequently Asked Questions addressing a number of tax law implications of the Windsor decision. First, the IRS indicated that for federal tax purposes the use of the terms "husband" or "wife" is to be considered interchangeably and without gender connotation. Second, if a couple enters into a same-sex marriage that is valid in the jurisdiction in which it is entered into, they shall be treated for all federal tax purposes as married and there should be no tracing of whether an individual is married based on separate state laws of the states in which they may live thereafter. Third, as of September 16, 2013, all qualified retirement plans must recognize same-sex spouses recognized under Revenue Ruling 2013-17 as spouses under the retirement plan, with the related spousal rights. Fourth, the IRS included procedures for employees to request income tax refunds and employers to request FICA and Medicare tax refunds on amounts charged to same-sex married persons for domestic partner coverage during open tax years. While this governs the federal tax withholding, state tax laws requiring withholding are not necessarily bound by this and each state's law must be considered. State tax law implications will need to be monitored until the constitutionality of Section 2 of DOMA is determined. Recent federal district court cases have looked at the constitutionality of state laws which did not recognize same-sex marriages from other jurisdictions. These cases required recognition of valid marriages from other jurisdictions.
Given the IRS's position requiring recognition of all spouses equally, employers must now consider also modifying their COBRA administrative provisions to make sure they are recognizing all spouses with notice and election rights as qualified beneficiaries under COBRA. Stay tuned for further guidance from the IRS. More is promised and needed to deal with periods prior to September 16, 2013.
Action Item: Employers need to be sure they know which of their employees are married in any jurisdiction.
Other Federal Agencies
The U.S. Department of Labor issued Fact Sheet 28F recognizing for purposes of the Family and Medical Leave Act that the spouse is to be determined by the laws of the state of residence of the individuals.
The Office of Personnel Management granted a special enrollment period under the Federal Employee Health Benefit Plan ("FEHBP") for all same-sex spouses to be enrolled beginning on the date of the Windsor decision and continuing for sixty days thereafter until August 26, 2013. While this applies to the FEHBP, special enrollment periods for marriage were enacted for employer sponsored group health plans in the Health Insurance Portability and Accountability Act of 1996 and we anticipate additional guidance for employer sponsored plans on this point.
The Social Security Administration ("SSA") guidance provided that for purposes of determining whether an individual is married when filing for Social Security benefits, the laws of the state of residence of the individual at the time they file for Social Security benefits will apply. Since the SSA decided to recognize a same-sex marriage based upon the law of the couple's state of residence at the time of application for Social Security benefits, employers who sponsor defined benefit plans which have benefit forms that coordinate with Social Security benefits (e.g., Social Security leveling) or other plans such as long term disability benefits which may offset for Social Security benefits, will also need to know the participant's state of residence at the time Social Security benefits were applied for (or in the case of a Social Security leveling form of benefit, the residence will need to either be addressed in an assumption for the calculation) to be able to understand and determine the impact of the marital status on the Social Security benefits which will then impact the calculation of the optional benefit form and/or the disability benefit plan offset.
The Center for Medicare and Medicaid Services issued a memorandum requiring Medicare Advantage HMOs to treat members of same-sex marriages equivalent to opposite gender married persons.
This piecemeal guidance means same-sex spouses may be married for purposes of some federal laws, but not for others. Careful planning and analysis will be required.
The Minnesota Insurance Department is requiring all policies issued in Minnesota to provide the same coverage for same-sex spouses as for opposite gender spouses. As contracts renew, employers may want to review the provisions regarding recognition of same-sex spouses in such contracts to determine if the policies match the employer's desired benefit structure.
Washington State has issued an advisory on estate taxes. This guidance should come quickly and hopefully in time to be incorporated into appropriate notifications such as the exchange notification and summary plan descriptions for the next open enrollment period.
More to Come
The IRS indicated it will provide additional guidance regarding qualified retirement plan benefits that commenced payment prior to September 16, 2013, and on other issues. CMS has also indicated it will provide additional guidance. This is just the beginning…