Earlier this year, the United States Supreme Court held the controversial Defense of Marriage Act to be unconstitutional to the extent it required federal law to ignore same-sex marriages licensed legally under the law of any state. The U.S. Department of Labor (“USDOL”) and the Internal Revenue Service (“IRS”) recently have issued opinions in the wake of that decision regarding the treatment of same-sex marriages by employers.
The definition of “marriage” now as including homosexual and lesbian partnerships deemed marriages by state law impacts employers primarily, but not exclusively, in the area of employee benefits. According to the USDOL’s recently-published Technical Release 2013-4, the term “spouse” must be read to include all individuals who are lawfully married under state law, including such individuals married to others of the same sex who were legally married in a state that recognizes such marriages, even if the individuals are domiciled in a state that does not recognize such marriages. However, the term “spouse” does not include any person in a state-recognized relationship that is not called or treated as a “marriage” under that state’s law. Such formal relationships not deemed marriages include civil unions and domestic partnerships, even if those relationships come with the same rights and responsibilities as do marriages under the states’ laws.
Inexplicably, the USDOL Technical Release opines that a “spouse” under the Federal Family and Medical Leave Act includes any individual in a marriage that is recognized by the state in which the employee resides, rather than in which he or she was married. While employers are used to dealing with definitions unique to the FMLA, this inconsistent definition of “spouse” for FMLA purposes, as contrasted with the definition of “spouse” for other laws’ purposes, is certain to give employers’ FMLA administrators even more gray hair. Whether the difference in the USDOC’s definition is intentional or an oversight remains to be seen.
In Revenue Ruling 2013-17, the IRS opines that same-sex couples will be considered married for purposes of the federal Internal Revenue Code if the couple’s relationship qualifies as a “marriage” in any jurisdiction, within or outside the United States, in which they were married and that recognizes same-sex marriages. In such cases now, benefits provided to employees’ partners in same-sex marriages no longer are treated as taxable to the employee, but are treated as non-taxable, just as they are for heterosexual, married employees. Employees in recognized same-sex marriages also now are able to pay for their spouses’ coverage under their employers’ benefits plans on a pre-tax basis. And same-sex married couples are allowed, under the ruling, to recoup any extra taxes the employee-spouses paid in prior tax years as a result of the “imputed income” problem they faced before the Supreme Court’s decision.
That news under the IRS’s revenue ruling is good for same-sex married couples. Unfortunately for such couples, however, the benefits of marriage for tax purposes are accompanied by the same downsides faced by heterosexual married couples, in particular the oft criticized “marriage penalty.”
In light of the Supreme Court’s decision and the USDOL’s and IRS’s recent opinions, employers would be wise to remove gender-specific language from their new-hire orientation documents that asks for information on new employees’ spouses. Employers also should review their benefit plans and plan-related documents to ensure that they account for the new rules in cases of same-sex marriages.