The IRS promised to provide more guidance regarding the tax treatment of same-sex couples in the wake of the Supreme Court's recent ruling invalidating Section 3 of the Defense of Marriage Act (DOMA). Slowly but surely, it's starting to deliver. The latest offering: New IRS Notice 2014-01 clarifies the rules relating to cafeteria plans, including flexible spending accounts (FSAs) and health savings accounts (HSAs).
As the name implies, a cafeteria plan is a tax-code-approved plan where participating employees are allowed to choose fringe benefits from a "menu" provided by the employer. Contributions to the plan are made on a pre-tax basis. One popular variation uses FSAs to reimburse employees for qualified health care or dependent care expenses up to certain thresholds. For example, the maximum contribution to a health care FSA in 2013 is $2,500. An HSA is a special account used to pay medical expenses for individuals with high-deductible health insurance plans. With an HSA, contributions are tax deductible, subject to limits indexed annually for inflation.
Here are some of the insights you may glean from the new IRS Notice:
- A cafeteria plan may treat a participant who was married to a same-sex spouse on the date of the Supreme Court decision as having experienced a change in legal marital status. Therefore, a same-sex spouse can now revoke a prior election or make a new election based on the marital status change.
- Such an election may be accepted by a cafeteria plan if it is filed at any time during a plan year that includes the date of the Supreme Court decision – June 26, 2013 – or a plan year that includes December 16, 2013. The plan also may permit a participant who married a same-sex spouse after June 26, 2013, to make a midyear election change due to a change in legal marital status. Any election made with respect to a same-sex spouse must satisfy the usual requirements.
- Under the new Notice, an FSA may be used to cover expenses of a participant's same-sex spouse if the expenses were incurred no earlier than the beginning of a plan year, including June 26, 2013, or the date of marriage, if later. In other words, the same-sex spouse may be treated as being covered by the FSA. Thus, coverage may be available for a plan year beginning on January 1, 2013.
- The maximum annual deductible contribution to one or more HSAs for a married couple if either elects family coverage under a high-deductible health plan is $6,450 for 2013. This deduction limit applies to same-sex married couples now treated as being married for federal tax purposes this year. So same-sex couples effectively have until December 31, 2013, to get hitched and still qualify for 2013 deductions.
Find more details on the tax treatment for same-sex couples under the new guidance at