On June 26, 2013, the United States Supreme Court held that section 3 of the Defense of Marriage Act (DOMA) (the section defining marriage as between one man and one woman) is unconstitutional (see our discussion in the July Employee Benefits Update. On August 29, 2013, the Internal Revenue Service (IRS) issued Revenue Ruling 2013-17 (the Ruling) and Frequently Asked Questions (FAQs) explaining how same-sex marriages would be treated for federal tax purposes. Any same-sex couple that is legally married in a jurisdiction (including any of the 50 states, U.S. territories and foreign countries) that recognizes samesex marriage will be treated as married for federal tax purposes, regardless of whether the couple lives in a jurisdiction that authorizes same-sex marriage. Essentially, if a couple is married in a jurisdiction that authorizes their marriage, the couple is treated as married regardless of where the couple resides. The Ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

Retirement Plans

Retirement plans must comply with this Ruling as of September 16, 2013. To comply with the Ruling, retirement plans must treat a same-sex spouse as a "spouse" for any purpose under the plan, such as qualified joint and survivor annuities, spousal consent requirements and implementation of qualified domestic relations orders.

Health and Welfare Plans

The Ruling does not explicitly mandate that a health plan change its coverage to include same sex spouses. However, we caution employers who are considering designing their health plans to continue to exclude same-sex spouses, while continuing to cover oppositesex spouses, to consult legal counsel.

For plans that currently cover, or will cover, same-sex spouses, employers do not need to impute income to the employee equal to the fair market value of health coverage provided to the same-sex spouse for federal tax purposes. This rule does not extend to state taxes, which may be required depending on the state where the participant resides and how that state taxes same-sex couples. Additionally, if an employer provided health coverage for a same-sex spouse or sponsored a cafeteria plan that allowed employees to pay premiums for health coverage on a pre-tax basis, the employer may claim a refund of, or make an adjustment for, any excess Social Security taxes and Medicare taxes paid if the period of limitations for filing a claim for refund remains open.