Thanks to last-minute action by the IRS, employee benefits administrators this year will have one more important change to communicate to employees as soon as possible: legally married same-sex couples can claim tax benefits this year if they’re enrolled in a flexible spending account, health care savings account or cafeteria plan.
The IRS – responding to the Supreme Court’s ruling in June invalidating part of the Defense of Marriage Act – said plans also are able to allow a midyear election change for participants marrying a same-sex spouse after the so-called Windsor decision.
Question: If a cafeteria plan participant was lawfully married to a same-sex spouse as of the date of the Windsor decision, may the plan permit the participant to make a mid-year election change on the basis that the participant has experienced a change in legal marital status?
Answer: Yes. A cafeteria plan may treat a participant who was married to a same-sex spouse as of the date of the Windsor decision (June 26, 2013) as if the participant experienced a change in legal marital status for purposes of Treas. Reg. § 1.125-4(c).
Q: When does an election made by a participant in connection with the Windsor decision take effect?
A: An election made under a cafeteria plan with respect to a same-sex spouse as a result of the Windsor decision generally takes effect as of the date that any other change in coverage becomes effective for a qualifying benefit that is offered through the cafeteria plan.
With respect to a change in status election that was made by a participant in connection with the Windsor decision between June 26, 2013 and Dec. 16, 2013, the cafeteria plan will not be treated as having failed to meet the requirements of section 125 or Treas. Reg. § 1.125-4 to the extent that coverage under the cafeteria plan becomes effective no later than the later of (a) the date that coverage under the cafeteria plan would be added under the cafeteria plan’s usual procedures for change in status elections, or (b) a reasonable period of time after Dec. 16, 2013.