The Groom Law Group released a brief in response to the court decision in the DOMA-related case of United States v. Windsor. In August, the Internal Revenue Service (IRS) had issued guidance in the form of Revenue Ruling 2013-17. The ruling specifically provided guidance on the definition of “spouse,” as well as the effective date of the decision, for federal tax purposes.
Groom advised that, by the September 16 effective date, employers and retirement plan administrators should take the following steps:
- Regardless of the plan document terms, treat all same-sex spouses as “spouses” for plan purposes. This is particularly important for beneficiary designations (obtaining proper spousal consent) and paying plan benefits, particularly in the event of death, to ensure that same-sex spouses are entitled to spousal rights and protections.
- Consider sending a participant communication to notify participants about Windsor and the IRS guidance and to recommend they update participant records (e.g., their beneficiary designation forms), indicate marital status on the distribution forms and provide spousal consent, when required.
- Review and update plan distribution forms and administrative procedures to make sure they reflect the new law, generally treating a same-sex spouse as a spouse for plan purposes. This includes a review of the domestic partner/same-sex marriage procedures and procedures for minimum required distributions, Code Section 415(b) limits, QDROs, loans, hardships, rollovers and, of course, QJSA/QPSA benefits.
With regard to health, welfare and fringe benefit plans, Groom advised that:
- If health, welfare and fringe benefits are currently provided to same-sex spouses (e.g., via a domestic partnership designation), stop imputing income no later than September 16, and clarify plan documents and summary plan descriptions to reflect that spouse now includes a same-sex spouse and to distinguish between same sex spouses and domestic partners/civil unions.
- If health, welfare and fringe benefits are not currently provided to same-sex spouses (e.g., via a domestic partnership designation), consider whether to add such benefits, and clarify plan documents and summary plan descriptions accordingly.
- With respect to coverage under a cafeteria plan, including a health flexible spending account and dependent care flexible spending account, clarify that the term spouse now includes same-sex spouse. For certain rules, such as the dependent care assistance plan contribution limits, this is likely mandatory. Additional IRS guidance regarding cafeteria plan administration is expected.
- With respect to coverage under a health savings account, notify employees that a same-sex spouse will be considered a spouse for purposes of contribution limits and tax-free distributions for qualified medical expenses.
- With respect to coverage under a health reimbursement arrangement, clarify whether a same-sex spouse will be considered a spouse for purposes of tax-free distributions for qualified medical expenses.
- If health benefits are provided to same-sex spouses, clarify that COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation of coverage and HIPAA (Health Insurance Portability and Accountability Act) special enrollment requirements apply to same-sex spouses in the same manner as any other spouse.
- If health and welfare benefits are funded through a voluntary employees beneficiary association (VEBA), determine whether trust document needs to be amended to reflect that spouse includes same-sex spouse.
- Determine whether spousal life insurance (including optional purchase provisions), accidental death and dismemberment insurance or beneficiary designations need to be updated to reflect that spouse includes a same-sex spouse, and coordinate with insurance carriers. Perform a similar review for self-funded plans and coordinate with third-party administrators (TPAs).
In all of these areas, said Groom, enrollment materials and plan entry paperwork should be updated to reflect the new rules and options available to same-sex spouses in light of Windsor.
More information about this topic can be found here.