The United States Supreme Court in United States v. Windsor found as unconstitutional the Defense of Marriage Act’s provision requiring federal laws to ignore same-sex marriages legally entered into under an applicable state law. The full extent of the fallout from this ruling has not yet been felt. However, the U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) have both chimed in following the ruling providing guidance on same-sex marriages which implicates employers.
The DOL recently released Technical Release 2013-4 which clarifies that the term "spouse" will be read to refer to any individuals who are lawfully married under any state law, including individuals married to a person of the same sex who were legally married in a state that recognizes such marriages, but who are domiciled in a state that does not recognize such marriages. Similarly, the term "marriage" will be read to include a same-sex marriage that is legally recognized as a marriage under any state law. The terms "spouse" and "marriage," however, do not include individuals in a formal relationship recognized by a state that is not denominated a marriage under state law, such as a domestic partnership or a civil union, regardless of whether the individuals who are in these relationships have the same rights and responsibilities as those individuals who are married under state law. This guidance is important to those working with employee benefit plans, plan sponsors, plan fiduciaries, and plan participants and beneficiaries. What is odd about this “guidance” is that the DOL also ruled that under the Family Medical Leave Act (FMLA), that a spouse for purposes of the FMLA is one who is recognized as such under the law in the state in which the employee resides.
In addition, the IRS has posted Revenue Ruling 2013-17 which confirms that a same-sex couple will be considered married for federal tax purposes if the couple was married in any jurisdiction—including a foreign country—that recognizes same-sex marriage. Until the Windsor decision, benefits provided to same-sex couples were considered taxable income to the employee (unless the employee’s partner/spouse qualified as the employee’s tax dependent). This resulted in additional income imputed to the employee on his/her W-2. Additionally, employees could not pay for a same-sex spouse’s/partner’s benefits on a pre-tax basis. This Revenue Ruling now allows same-sex couples to file amended returns for past tax years to recoup any extra taxes paid as a result if “imputed income.” However, along with this benefit, high, dual earning same-sex couples will also now face the dreaded “marriage penalty” incurred by opposite sex married couples.
What these rulings in mind, it would be wise for employers to review their new-hire paperwork to make sure that gender-neutral language is used when asking for spousal information. Also, employers should review their benefits plans to make sure that they take into account the federal government’s recognition of same-sex marriages.