The IRS issued Notice 2014-1 to address issues relating to cafeteria plans, flexible spending account plans and health savings accounts for employees with same-sex spouses. The guidance incorporates the Supreme Court’s decision in United States v. Windsor, which ruled the Defense of Marriage Act unconstitutional, thereby recognizing same-sex marriage.
The Windsor decision created uncertainty with respect to the tax treatment of employee benefits provided to same-sex spouses. The IRS’ new notice recognizes the retroactive effect of marital status and provides:
- Employees who were in same-sex marriages as of June 26, 2013 or later may change their cafeteria plan elections to reflect their marriages.
- Employers may allow for the reimbursement of a same-sex spouse’s expenses from an employee’s FSA funds on and after June 26, 2013.
- Employers should review their W-4 forms for employees whose same-sex domestic partner is covered under the employer’s health plan to see if the partner is now a same-sex spouse.
- Contributions limits for HSAs and Dependent Care FSA contributions will be combined for spouses in a same-sex marriage.
Employers should review the tax implications of their benefit plans to make sure that employees with same-sex spouses are now receiving proper tax treatment.
