We are receiving many questions on recent rulings regarding the Defense of Marriage Act (DOMA). Employers and employees have awaited federal guidance on how the decision would affect taxation and eligibility for employer-based benefits for same sex spouses and domestic partners. The ruling effective September 16, 2013 does not expand marriage rights to other forms of same-sex unions such as civil unions or domestic partnerships; it only applies to couples who are legally married under state law.
This legislation is far reaching and we do not anticipate one cut and dry answer or set of instructions on how employers need to comply with the effects of the DOMA reversal.
Under this ruling, a same-sex married couple will be considered married for all federal tax purposes requiring marriage, such as tax-return filing status, dependency and deduction availability, and employee benefits. If an employer offers benefits to same-sex spouses but requires payment for that coverage on an after tax basis, this practice must cease (although it remains the practice for other non-marriage unions, such as domestic partnerships and civil union partners). Coverage for the same-sex spouse may be paid with pre-tax dollars. In addition, for tax year 2013 and going forward, same-sex spouses generally must file using a married filing separately or joint filing status. The IRS is expected to issue future guidance on reimbursement on previous same sex benefits that were offered after tax.
Here is a quick review of that recent guidance and a court case that gives us some insight.
Department of Labor (DOL) and FMLA
The DOL website was revised with an FAQ to clarify that when granting FMLA the employer must look to the state in which the employee resides when providing FMLA for the care of a spouse. This FAQ defines a spouse as “a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including “common law” marriage and same sex marriage.” Therefore, while the employer may be in a state that does not recognize or permit same sex marriage, the employer must provide FMLA for an employee that has a same sex spouse and resides in a state that allows for or recognizes same sex spouses.
Obergefell v. Kasich, 2013 WL 3814262 (S.D. Ohio 2013)
This federal court case involves a same sex couple who were legally married in Maryland and resided in Ohio, a state that neither permits nor recognizes same sex marriage. The couple got married due to the imminent death of one of the spouses and wanted the marriage to be recognized for estate purposes.
The court ruled that the couple had established a likelihood of prevailing on their claim that the state had no purpose in not recognizing their marriage and ordered the state not to refuse a death certificate that listed the couple as married. According to the court, the state’s refusal to recognize same sex marriages that were legally performed elsewhere serves no purpose other than to create inequality and is therefore, unconstitutional.
This case bears out that regulators may decide that the recognition of same sex marriage should be based on the state of celebration versus the state of residence.
Social Security Administration (SSA) and Income Benefits
The Social Security Administration recently said the demise of DOMA means gay couples who were married in one of the 13 states that allow such unions — and who also live in one of those states — can collect “spousal retirement benefits.”
SSA income benefits are also available to individuals who are treated as spouses under their state’s inheritance laws. Some states confer this spousal status to same sex individuals even though the state does not permit or recognize same sex marriage.
Consequently, even if the state where the same sex couple resides does not permit or recognize same sex marriage, the SSA might provide income benefits under the spousal benefit provision of the Social Security statute if the partners have inheritance rights in that state.
This announcement is an example of the complexity of trying to fit together seemingly unrelated pieces of regulation that would be easier if same sex couples were recognized by federal regulations no matter where the couple resides.
WWW will continue to monitor the updates and clarification and release information as it becomes available.