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The Internal Revenue Service on Monday issued further clarification on changes employers may need to make to certain employee benefit programs following the U.S. Supreme Court's partial overturn of the Defense of Marriage Act earlier this year.
Prior to the Supreme Court's decision in June — which struck down the federal definition of marriage as the union of one man and one woman — employers could not allow married gay and lesbian employees to elect accident and health care coverage on a pre-tax basis under a cafeteria plan, unless the spouse also qualified as a tax dependent.
The restrictive definition of marriage under DOMA also prevented employees from using their tax-favored flexible spending accounts to cover health care expenses incurred by their same-sex spouses.
In a guidance document issued Monday afternoon, IRS officials said employers must allow their employees to retroactively enroll their same-sex spouses for pretax coverage under a cafeteria plan, beginning with the plan year that includes June 26, 2013, the date of the Supreme Court's decision.
The IRS said it is allowing employees with same-sex spouses the rare opportunity to make mid-year changes to their cafeteria plan elections — those changes typically must be made at the beginning of the plan year — because the court's decision effectively amounted to a change in their legal married status in the eyes of the federal government.
Employees who have been paying federal income and employment taxes for their same-sex spouses' cafeteria plan benefits in plan years beginning in 2010 or later are eligible to have those taxes refunded, the guidance document said.
Additionally, the IRS' guidance indicated that employees will be permitted to use their tax-favored FSAs — including health, dependent care and adoption assistance FSAs — to reimburse covered expenses incurred by their same-sex spouses or their spouses' dependents, as long as those expenses were incurred within the plan year that includes the date of the Supreme Court's decision or the date of their marriage, whichever is later.
The IRS also clarified that the maximum deductible contribution to tax-favored health savings accounts for married couples enrolled in family coverage under a high deductible health plan — currently $6,450 per year — and the maximum annual contribution to dependent care FSAs for married couples will apply to same-sex marriages beginning with the 2013 tax year.