Earlier this summer, following the Supreme Court's issuance of the landmark case, United States v. Windsor, which held Section 3 of the Defense of Marriage Act (DOMA) to be unconstitutional, we published an Executive Alert identifying some of the ways in which the Court's decision would impact employers' benefit plans and policies. We noted that the Internal Revenue Service (IRS) was expected to provide guidance with regard to same-sex couples, reflecting the demise of the federal ban on the recognition of same-sex marriages. On August 29, 2013, the IRS issued its initial guidance in the form of Revenue Ruling 2013-17 and posted a series of Frequently Asked Questions and Answers (FAQs) on its website. This guidance answers a number of the questions facing employers with regard to their employee benefit plans but leaves some important issues yet to be decided. The ruling and the FAQs also highlight the need for employers and plan administrators to take certain actions now with regard to benefit plan administration.
IMPORTANT TAKE-AWAY FOR EMPLOYERS
The Revenue Ruling and the FAQs address a broad range of issues relating to the tax status of same-sex married couples. However, with regard to spousal rights under the employee benefit plans, and the tax treatment of employer-provided benefits for same-sex spouses, here are some key points:
STILL UNANSWERED QUESTIONS
The IRS intends to issue further guidance on the retroactive application of the Windsor decision to other employee benefits and employee benefit plans. The FAQs indicate that this future guidance will provide sufficient time for plan amendments and to make any necessary operational corrections to plans for periods prior to the issuance of that guidance. Among the unanswered questions which may be addressed in that future guidance may be:
IMMEDIATE COURSE OF ACTION
Many employers have been reluctant to move forward with benefit plan design and administrative changes to reflect the Supreme Court's decision in Windsor until guidance has been issued. With the issuance of Revenue Ruling 2013-17, now is the time to act. With the September 16, 2013, effective date quickly approaching, here are steps that every employer should begin to take, if they have not begun so already:
Last week's publication of Revenue Ruling 2013-17 and the FAQs serve as a clarification and guidance of the IRS's position regarding the impact of the Windsor decision on a broad range of tax matters, including the administration of tax-qualified retirement plans and the tax reporting and withholding obligations for tax-favored employee benefits. The members of BakerHostetler's Employee Benefits Group stand ready to assist you with your employee benefit plan design and operation issues arising in connection with the recognition of same-sex spousal rights. For questions or assistance with employment or employee benefit plan issues, please contact your regular BakerHostetler attorney or any member of BakerHostetler's Employee Benefits Team.
Authorship credit: John W. Boyd
A copy of Revenue Ruling 2013-17 can be viewed here.A copy of the FAQs posted to the IRS web-site may be viewed here.
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