Source: United Benefit Advisors (UBA)
On Dec. 16, 2013, the Internal Revenue Service (IRS) issued Notice 2014-1, which provides some answers about covering same-sex spouses under Section 125 plans in light of the Windsor decision. In the Windsor decision, the U.S. Supreme Court ruled that the part of the Defense of Marriage Act (DOMA) that prohibited same-sex marriages for federal law purposes was unconstitutional. This court decision does not require employers to provide coverage to same-sex spouses under their group health or Section 125 plans, but for employers who do cover the same-sex spouses, the IRS has provided some answers.
XYZ Co. sponsors a Section 125 plan with a calendar year plan year. The plan includes a health FSA. XYZ permits same-sex spouses to participate in its health plan and they are eligible dependents under its health FSA. Employee A married same-sex Spouse B in October 2012 in a state that recognized same-sex marriages. During open enrollment for 2013, Employee A elected self-only health coverage. Employee A also elected to contribute $2,500 to his health FSA.On Oct. 5, 2013, Employee A elected to add health coverage for Spouse B under XYZ’s health plan and made a new salary reduction election under the Section 125 plan to pay for Spouse B’s health coverage.On Oct. 15, 2013, Employee A submitted a reimbursement request under the health FSA for a health care expense incurred by Spouse B on July 15, 2013. Employee A’s FSA may reimburse the covered expense.Employee C also has a same-sex spouse that she married in September 2011, but she did not elect to add health coverage for her Spouse D under the XYZ group health plan after the court decision. On Oct. 15, 2013, Employee C submitted a reimbursement request under the health FSA for a health care expense incurred by Spouse D on July 15, 2013. The reimbursement request included a representation that Employee C was legally married to Spouse D on the date that the health care expense was incurred.Employee C’s FSA may reimburse the covered expense.