Last week, our guest blogger Christine Roberts explained the impact the recent Supreme Court ruling on the Defense of Marriage Act has on employee benefit plans. Since that blog, the IRS and U.S. Department of Labor (“DOL”) have both issued written guidance about this matter. Christine is back guest blogging with us this week to explain the new written guidance.
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The IRS and DOL have both issued written guidance confirming that a legally performed same sex marriage must be recognized by employers for Federal tax and ERISA plan purposes regardless of the couple’s state of residence. See IRS Revenue Ruling 2013-17; DOL Technical Release No. 2013-04.
In addition, IRS Notice 2013-61 contains instructions for employers to correct over-withheld income and FICA taxes during the remainder of 2013 for employees in legal same sex marriages, resulting from these employees being attributed with “imputed income” equal to the value of health and other benefits provided to same sex spouses. It also describes ways that employees in legal same sex marriages can seek income tax refunds for “open” tax years (usually 3 years, back to 2010) in relation to same. In order to do so they must re-file as married for all tax purposes, not just the refund. For a number of couples, recouping the additional tax will not be worth loss of other deductions or credits that go along with filing individually.
Employers may also claim a refund (or make an adjustment) for their portion of Social Security and Medicare taxes paid on the value of health coverage provided to the same-sex spouse of a welfare benefit plan participant, for years within the statute of limitations. IRS Notice 2013-61 provides streamlined ways for employers to seek these refunds using a single IRS Form 941 or 941-X for 2013 rather than filing that return quarterly.
However, employers cannot claim a refund for over-withheld income tax on the value of health coverage provided in prior years to same-sex spouses in open tax years.As mentioned they can correct over-withheld income taxes during the balance of 2013.
The DOL guidance is fairly sketchy, just basically confirming that legally married same sex spouses will have equal rights under ERISA to opposite sex spouses. Further guidance will be needed from DOL on implementing the “nuts and bolts” of ERISA plan participation (COBRA elections, spousal consents, joint and survivor annuities). Clearly we won’t be receiving any such guidance while the government is shut down.
Finally, couples contemplating same-sex marriage should be advised that they may lose eligibility for financial aid under the Affordable Care Act (“Obamacare”) toward the purchase of individual health insurance. Premium tax credits and cost sharing on the state and federally-run health exchanges are limited to individuals or households earning no more than 400% of Federal Poverty Levels (currently, $45,960 for an individual and $62,040 for a household with 2 members). So someone who qualified for financial aid as an individual may not remain qualified for financial aid as part of a household of two, depending upon his or her spouse’s income.