By Correy E. Stephenson
The Daily Record Newswire
Same-sex couples — and the employers who pay them — still face many questions in the wake of the U.S. Supreme Court’s June decision striking part of the federal Defense of Marriage Act.
The Internal Revenue Service has stepped up to provide guidance for same-sex couples on filing federal tax returns, and for employers that administer qualified employee benefit plans.
Several other federal agencies have issued employee-benefit guidance that may point the way for the private sector.
On Aug. 29, the Treasury Department and Internal Revenue Service released Ruling 2013-17, declaring that the agency will look to the state of celebration to determine if a couple is validly married for all federal tax-related purposes.
If a couple is married in a state that recognizes same-sex unions, therefore, it doesn’t matter that they reside in Virginia, which passed a constitutional amendment banning same-sex marriage.
The couples still may file a joint income tax return. The ruling applies with equal measure to all federal tax considerations from income to gift and estate taxes, to personal and dependency exemptions, employee benefits and IRA contributions.
In addition, the ruling has retroactive effect. The three-year statute of limitations for filing a federal tax refund claim gives same-sex couples the chance for a “do-over” for tax years 2010, 2011 and 2012.
Employers should take note of the ruling, which requires that as of Sept. 16, all qualified employee benefit plans must treat same-sex spouses the same as opposite-sex spouses for all qualified plan purposes — like survivor benefits, for example.
One complication remains, however: Taxpayers in the 37 states like Virginia that do not recognize same-sex marriage will now have to file state and federal tax returns with different statuses.
“From a federal tax perspective, the ruling answers a lot of questions,” Richmond attorney Ashley Payne said. “But questions still remain about other federal agencies.”
In a 5-4 vote in U.S. v. Windsor, the Supreme Court held that that Section 3 of DOMA, defining marriage as the union of man and woman, was unconstitutional.
But the practical implications of the landmark decision are still being worked out – one federal agency at a time.
In addition to the IRS, several other federal agencies have taken steps to comply with the decision.
Attorney General Eric Holder Jr. sent a letter to the Speaker of the House on Sept. 4 stating that at the direction of President Barack Obama the Department of Justice will no longer enforce 38 U.S.C. §§ 101(3) and 101(31).
The provisions covered veteran’s benefits and defined “spouse” as a “person of the opposite sex.”
Same-sex spouses of veterans and some active duty or reserve members will now be eligible for benefits like home loans and health care.
In August, the Department of Labor issued an internal memorandum to update various documents removing references to DOMA and making clear that spousal leave under the Family and Medical Leave Act,
for example, is available to same-sex spouses. Secretary Thomas Perez indicated to DOL staff members that the changes are “one of many steps the Department will be taking over the coming months” to implement the Windsor decision.
Not to be outdone, the Department of Defense announced that same-sex spouses of uniformed service members and DOD civilian employees will now be included in coverage. The agency said it reviewed its policies in light of Windsor and broadened its coverage beginning in September for benefits like health care, housing allowance and family separation allowance.
Payne noted that the Department of Health and Human Services released a memo clarifying one aspect of coverage as applied to same-sex couples.
The Medicare Advantage plan entitles Medicare beneficiaries to care in the same skilled nursing facility where their spouse resides.
Previously, same-sex spouses did not qualify for this benefit and had to either dis-enroll from the Advantage plan and pay out of pocket to live in the same nursing home as their spouse or live in a separate facility.
The HHS memo makes clear that the Advantage program now applies to same-sex spouses — regardless of the state in which they reside — and took immediate effect as of Aug. 29.
Many other questions about Medicare and Medicaid benefits remain, Payne noted, but the memo could be an indication that, similar to the IRS, HHS intends to recognize the state of marriage celebration rather than the state of residence for all purposes.
One outlier to the wave of federal recognition of same-sex couples: the Social Security Administration.
A recently updated operations manual advising eligibility workers about how to make a determination as to whether a claimant is eligible for benefits recognizes validly married same-sex couples that also reside in a state that recognizes same-sex marriage — i.e., California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, Washington and Washington, D.C.
However, claims for legally married same-sex couples now living in states where their marriage is not recognized are to be held pending further guidance from the Administration, Payne explained.
The SSA noted that it is “working with the Department of Justice to interpret the Windsor decision,” and will continue to update its policies and procedures.
The Administration has not taken a formal position, instead “holding” claims for the time being, so the agency could still select celebration state or state of residence.
Some employers in Virginia had begun offering benefits to same-sex couples even prior to the Windsor decision, Payne said.
Private employers may look to federal agency action for guidance on administering employee benefits going forward, but state and local employers in the commonwealth face the counterweight of the 2006
constitutional amendment that prohibits the commonwealth and its political subdivisions from recognizing same-sex marriages or relationships that “approximate” marriage.
On Aug. 1, the American Civil Liberties Union of Virginia joined other groups in a class action lawsuit filed in Harrisonburg U.S. District Court challenging the amendment barring recognition of same-sex unions.
In the meantime, “there are still a lot of big unknowns out there,” Payne said.
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