On June 26, 2013, in United States v. Windsor, the Supreme Court overturned the Defense of Marriage Act ("DOMA"), holding that DOMA was unconstitutional. This decision now requires changes in the administration of the State Employee and Retiree Health and Welfare Benefits Program (the Program) for same-sex married couples who reside in a state that recognizes same-sex marriage (California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington, and the District of Columbia). The following is our preliminary assessment of the effect of the Court's decision. Additional details will follow as more guidance is received.
*9/9/13 UPDATE: On August 29, 2013, the U.S. Department of Treasury and Internal Revenue Service issued Revenue Ruling 2013-17 providing guidance on the application of the Windsor decision. The Revenue Ruling and additional information can be obtained from the IRS web pages identified in the “employee refunds” section below.
Based on the Revenue Ruling, the Program will treat all same-sex couples – legally married in jurisdictions that recognize their marriages – as married for federal tax purposes, regardless of their state of residence. Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or foreign country is covered by the ruling.For same-sex married couples residing in states that do not recognize same-sex marriages, the Employee Benefits Division updated their healthcare deductions effective September 16th.
Pre-tax coverageThe employee-paid premium for health benefits coverage for same-sex spouses and their children is now eligible to be paid with a pre-tax deduction. The first paycheck in which this will be reflected is July 31, 2013 for those paid by the Central Payroll Bureau and August 2, 2013 for university employees.
Imputed incomeThe State's contribution toward health benefits coverage for same-sex spouses and their children is no longer considered wages and will not be included in the employee's taxable gross income. The first paycheck in which this will be reflected is July 31, 2013 for those paid by the Central Payroll Bureau and August 2, 2013 for university employees.
FICA charged to retireesCurrently, as all retiree benefit deductions are taken on a post-tax basis, retirees covering same-sex spouses were billed quarterly for FICA charges applicable to the imputed income attributable to the spouse’s coverage. These FICA charges will end in the July retirement allowance.Flexible Spending AccountsValid medical expenses for same-sex spouses and their children are now eligible to be deducted from employee FSA accounts. An employee with a healthcare FSA for the previous plan year (July 1, 2012 through June 30, 2013) can submit eligible medical expenses for his/her same-sex spouse or same-sex spouse's child for FSA reimbursement. Note: For the previous plan year, eligible expenses can be incurred until September 15, 2013, and must be submitted by October 15, 2013.
In addition, an employee with a healthcare FSA for the current short plan year (July 1, 2013-December 31, 2013) can submit eligible medical expenses for his/her same-sex spouse or same-sex spouse's child for FSA reimbursement.Qualifying EventUnless the IRS gives guidance to the contrary, the Court's invalidation of DOMA is not a qualifying event which would allow same-sex married couples to make mid-year changes to their health benefits elections. Same-sex spouses were eligible to enroll in the Program prior to Windsor, therefore, the ruling did not create a change in status for same-sex married couples.
HIPAA special enrollment rightsThe portability provisions of HIPAA provide special health plan enrollment rights to “spouses” and “dependents.” In limited circumstances, these rights allow eligible individuals to enroll for benefits outside of a health plan’s annual open enrollment period when an employee, spouse or dependent loses eligibility for other group plan or insurance coverage. DOMA effectively limited these rights for same-sex spouses, and only permitted a same-sex spouse who qualified as a dependent to be entitled to these rights. Post-DOMA, same-sex spouses and their children are eligible for special health plan enrollment rig-ts, regardless of their dependent status. If your same-sex spouse or dependent has recently lost eligibility for a group health plan or insurance coverage, please contact your agency benefits coordinator or the Employee Benefits Division for further information.Employee refundsEmployees may be able seek tax refunds for taxes paid on health care coverage for their same-sex spouse and should contact a tax advisor regarding these matters.*9/9/13 UPDATE: Employee refundsThe Revenue Ruling clarifies that individuals who were in same-sex marriages may 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.Additional information regarding employee tax refunds, the Revenue Ruling, and related matters can be obtained at the IRS pages below:http://www.irs.gov/uac/Newsroom/Treasury-and-IRS-Announce-That-All-Legal-Same-Sex-Marriages-Will-Be-Recognized-For-Federal-Tax-Purposes;-Ruling-Provides-Certainty,-Benefits-and-Protections-Under-Federal-Tax-Law-for-Same-Sex-Married-Coupleshttp://www.irs.gov/pub/irs-drop/rr-13-17.pdfhttp://www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Same-Sex-Married-Coupleshttp://www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Registered-Domestic-Partners-and-Individuals-in-Civil-Unions
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