B R O K E R W O R L D M A G A Z I N E

The Benefits Brief…

JANET Supreme Court Rules LeTOURNEAU ACFCI, is the compliance man- ager at WageWorks. She draws upon more than 20 years of On The Defense Of experience with flexible benefits plans and tax laws to perform consulting services and monitor quality control. Marriage Act LeTourneau is a frequent speaker to employer groups and conferences and was formerly hat started out as a tax refund suit same-sex partners. However, in early 2011, on the board of directors for the came to a dramatic and far-reach- the Department of Justice announced that Employers Council on Flexible Wing conclusion on , 2013, when it would no longer defend the constitution- Compensation (ECFC) and is the Supreme Court of the United States ality of Section 3. a current member of the ECFC (SCOTUS) held that the definition of mar- Technical Advisory Committee riage contained in the Defense of Marriage Supreme Court’s Ruling (TAC). She is the lead instructor Act (DOMA) is unconstitutional. SCOTUS SCOTUS’ ruling was very narrow and stated, “DOMA is unconstitutional as a found Section 3 of DOMA, which provided for the Section 125 administra- deprivation of the equal liberty of persons that only opposite-sex marriages were rec- tors training workshop. that is protected by the Fifth Amendment.” ognized for federal law, to be unconstitu- LeTourneau was one of the The ripples from this decision will be many tional. However, Section 2 of DOMA (which first people in the country to earn and affect multitudes of people in the United allows a state to refuse same-sex marriages the Advanced Certification in States, not to mention the federal tax code. or to recognize the validity of same-sex Flexible Compensation Instruc­ In addition to the Affordable Care Act’s marriages that were legally performed in tion designation sponsored by the (ACA) mountain of changes, this decision another state) was not at issue in this case Employers Council on Flexible provides even more work for employers, and, as a result, still stands. Compensation. She is a certified third party administrators, payroll vendors, SCOTUS reminded the federal govern- trainer in the ACFCI program. accountants and lawyers for years to come. ment that whether any couple is legally LeTourneau can be reached married is determined at the state level. For Background decades couples have received marriage at WageWorks, 4200 West 115 DOMA created a federal definition of licenses from the state, had them duly Street, Suite 300, Leawood, KS marriage. Prior to DOMA, the definition signed and then submitted for recording 66211. Telephone: 913-498-4157. and regulation of marriage was treated as purposes. The federal government and Email: jan.letourneau@wage- being within the authority and realm of employers, for the most part, simply asked works.com. individual states. Since a 1958 revenue rul- taxpayers to check a box—single or mar- ing, the federal government followed state ried—for submissions such as tax returns. laws on marriage and cohabitation. Thus, SCOTUS’ ruling went on to say that all states inherently held rein over marriage DOMA violated basic due process and and divorce issues, with some states even equal protection principles applicable to the defining “common law” marriage arrange- federal government by writing inequality ments. This ended with DOMA. into the entire Internal Revenue Code. It In 1996 President signed is already estimated that more than 1,000 DOMA into law. As a result of Section 3 of federal statutes and many more regulations DOMA, the definitions of “marriage” and will be affected by this one decision. “spouse,” for the purpose of constructing The good news? All states have laws federal laws and regulations, excluded related to marriage. However, states are

Reprinted from BROKER WORLD September 2013 www.brokerworldmag.com Used with permission from Insurance Publications Subscriptions $6/yr. 1-800-762-3387 B R O K E R W O R L D M A G A Z I N E

now divided on same-sex marriages. As a (8/1/2013), NH, NY, RI (8/1/2013), VT, In the coming months and years the IRS result, the ruling creates as many questions WA and DC. will issue guidance on this and many more as it answers: The following states (and territory) questions. They now have to sift through a Whether married same-sex couples do not permit same-sex marriage to be the entire federal tax code and determine are entitled to refunds on federal taxes performed and do not recognize same-sex whether the SCOTUS decision on DOMA previously paid. marriages that were performed in another requires changes. The IRS will also direct a Whether a person may seek reim- state: AL, AK, AZ, AR, FL, GA, HI, ID, IN, taxpayers if tax returns may be amended bursement for qualified expenses incurred KS, KY, LA, MI, MS, MO, MT, NE, NC, ND, and refiled along with the time span of any by a same-sex spouse from flexible spend- OH, OK, PA, SC, SD, TN, TX, UT, VA, WV, retroactive tax action. ing accounts (FSAs) and/or health reim- WI, WY and Puerto Rico. States that don’t recognize same-sex bursement arrangements (HRAs) that were The following states recognize same-sex marriages may not see much change at this previously denied. civil unions that offer some protections time. However, for multi-state employers, a What’s the effective date for such for same-sex couples, including same-sex this will be a challenging time to adopt benefits determinations (e.g., the date on which the couples married in other states: CA, CO, and processes for some states, while retaining couple was married)? HI, IL, NV, NJ and OR. current practices for all other states. a What implications does this ruling For benefit specialists, it’s important have on the administration of tax-advan- OPM Guidance to carefully follow the application of this taged benefits, such as a health FSA? The first hint of the administration’s ruling and any subsequent guidance that These and similar questions must be addressed application of this decision to the issue may be issued from government agencies by the federal government and various state of benefits appeared on July 1, 2013, in to determine if any adjustments need agencies. an eight-page memorandum issued by to be made to code sections and plan It is clear that the DOMA ruling will affect the United States Office of Personnel documents. We’ll continue to follow the the federal tax arena as well as benefit and Management (OPM). This memo is not application of the SCOTUS decision in pension plan documents, health privacy, official guidance on the subject. Rather, it is future columns. Social Security benefits, pension payments the application of the decision to one (albeit And as with any change, the journey starts and taxes on inheritances. a very large and important) employer. The one step at a time. Or, in this instance, one full memo is available at: http://www.opm. revenue ruling or regulation at a time.  Current State Treatment gov/retirement-services/publications-forms/ of Same-Sex Marriages benefits-administration-letters/2013/13-203.pdf. The information contained in this article is not intended to be legal, accounting, or other professional The following states permit same- The OPM memo immediately extends advice. We assume no liability whatsoever in connec- sex marriages to be performed: CA, CT, federal benefits to same-sex spouses, with- tion with its use, nor are these comments directed to DE (7/1/2013), IA, ME, MA, MD, MN out regard to state of residence. specific situations.

Reprinted from BROKER WORLD September 2013 www.brokerworldmag.com Used with permission from Insurance Publications Subscriptions $6/yr. 1-800-762-3387