The Internal Revenue Service has issued guidance on the application of rules in the Tax Code relating to health savings accounts and flexible spending accounts to same-sex couples in the aftermath of the Supreme Court’s landmark decision earlier this year striking down the Defense of Marriage Act.
Until the decision of the Supreme Court last June found the law to be unconstitutional, Section 3 of the Defense of Marriage Act prohibited the recognition of same-sex marriages for purposes of federal tax law. The Supreme Court held on June 26, 2013 that section 3 of DOMA is unconstitutional because it violates Fifth Amendment principles.
Among the items of guidance provided by the IRS in the questions and answers section of the notice, the IRS said that a cafeteria plan may treat a participant who was married to a same-sex spouse as of the date of the Windsor decision (June 26, 2013) as if the participant experienced a change in legal marital status. Accordingly, a cafeteria plan can allow a taxpayer to revoke an existing election and make a new election in a manner consistent with the change in legal marital status.
For purposes of election changes due to the Windsor decision, an election may be accepted by the cafeteria plan if it is filed at any time during the cafeteria plan year that includes June 26, 2013, or the cafeteria plan year that includes Dec. 16, 2013. A cafeteria plan can also permit a participant who marries a same-sex spouse after June 26, 2013, to make a mid-year election change due to a change in legal marital status. Any election made with respect to a same-sex spouse (and/or the spouse’s dependents) must satisfy the requirements of the regulations concerning election changes generally, including the consistency rule under Treas. Reg. 1.125-4(c)(3).
A cafeteria plan may permit a participant’s FSA, including a health, dependent care, or adoption assistance FSA, to reimburse covered expenses of the participant’s same-sex spouse or the same-sex spouse’s dependent that were incurred during a period beginning on a date that is no earlier than (a) the beginning of the cafeteria plan year that includes the date of the Windsor decision or (b) the date of marriage, if later. For this purpose, the same-sex spouse may be treated as covered by the FSA (even if the participant had initially elected coverage under a self-only FSA) during that period.
For example, a cafeteria plan with a calendar year plan year may permit a participant’s FSA to reimburse covered expenses of the participant’s same-sex spouse or the same-sex spouse’s dependent that were incurred during a period beginning on any date that is on or after Jan. 1, 2013 (or the participant’s date of marriage if later).
The maximum annual deductible contribution to one or more HSAs for a married couple either of whom elects family coverage under a high-deductible health plan is $6,450 for the 2013 taxable year, as adjusted for cost of living increases. This deduction limit applies to same-sex married couples who are treated as married for federal tax purposes with respect to a taxable year (that is, couples who remain married as of the last day of the taxable year), including the 2013 taxable year.
