July 17, 2013 by Rosa Douglas
The U.S. Supreme Court’s recent ruling on June 26, 2013, marked the end of the 1996 Defense of Marriage Act (DOMA), a United States law blocking federal recognition of gay marriage – defining marriage as between a man and a woman. Because of this definition of marriage, “benefits and programs enjoyed by opposite-sex couples aren’t available to gay and lesbian couples under federal employment, health, tax and other laws” says USAToday.com. However, striking down DOMA did not define a marriage. Rather, leaving it to the states to decide. Consequently, this decision clears the way for same-sex couples to receive federal tax benefits in the 12 states and Washington D.C., where those marriages are currently recognized.
If you’re a business who reside in these states where same-sex marriage is legal, this could mean that employee benefits packages may need to be updated to include married same-sex couples who are eligible for federal benefits.
These changes include:
- Health insurance: Health insurance provided to gay and lesbian employees can now be extended to their spouse’s tax free. However, if your business self-insures benefits, meaning the benefits are paid out if the company’s general assets, you still have the option to exclude same-sex spouses if you choose.
- FMLA leave: The current law does not offer gay and lesbian employees time off from work to take care of immediate family members. If you are in a state that offers family leave based on The Family and Medical Leave Act (FMLA), these benefits will be extended to same-sex couples, which could increase the time taken off by employees.
- Flexible Spending Accounts: If you offer a Flexible Spending Account to your employees, pre-tax money can now be set aside into your employee’s spending accounts for their same-sex spouse, reducing their tax bill.
- Tax Liabilities: Many of your tax liabilities are calculated based on the taxable income of your employees. If the total taxable income of your employee decreases, your business’ tax bill may decrease as well. However, you may want to consult your tax advisor for more information on how it will affect your pay roll taxes.
- Pensions: If you offer pensions that provide benefits to spouses, then pension plans may now be offered to same-sex spouse of your employees.
With DOMA, many more questions may arise than are answered as to what state laws apply to you and your business. Additional information from federal agencies, individual states, and the IRS, over the coming weeks and months, should help to clarify regulations and help to provide guidance for businesses about other same-sex tax benefits. You may want to review your company’s current plans and policies in light of the Court’s decision and decide what actions need to be taken.