Federal tax ruling changes tax advantages and benefits for same-sex couples

On Aug. 29, 2013, The Department of Treasury and the Internal Revenue Service ruled on treatment of taxation for same-sex married couples, regardless of the couple’s state of residence.

The June 2013 U.S. Supreme Court ruling in United States v. Windsor overturned the Defense of Marriage Act (DOMA) requiring the federal government to recognize same-sex marriages equally to opposite-sex marriages for all federal laws and benefits, including tax advantages never before offered to same-sex couples.

The Supreme Court ruling does not require all states to recognize same-sex marriage.  States retain the authority of whether to recognize same-sex marriages, even if the couple is legally married in a state that recognizes them.  However, for federal tax purposes, all legally married same-sex couples, regardless of whether they live in a state that recognizes these marriages, will benefit from the federal ruling.

These tax advantages include treatment of benefit premium deductions for same-sex married couples under Section 125 of the IRS Code.  Prior to DOMA being overturned, same-sex married couples who participated in an employer sponsored health plan could not have their total premium contribution taken on a pre-tax basis.  The employee could contribute his or her portion on a pre-tax basis, but the difference between a “single” employee contribution, and the “two-person” contribution was required to be deducted after tax.  From 2013 forward, the premium contribution amount for a same-sex spouse from an employee’s paycheck must be taken on a pre-tax basis.  The same advantages apply to medical flexible spending accounts (FSAs), and Health Savings Accounts (HSAs).  Same-sex married couples now receive the same tax advantages including the ability to claim each other’s medical expenses against FSA and HSA accounts.

Employees who were in a same-sex marriage prior to 2013 and did not receive the same tax advantages as opposite-sex married couples may amend their previous tax filings within the IRS period of limitations.  (Generally, the period of limitations is three years from the date the return was filed, or two years from the date the tax was paid, whichever is later.)

The State of Michigan does not currently recognize same-sex marriage.  Employers may opt to offer “domestic partner” coverage for same-sex married couples, but it is not required.  If a BCN Services client opts to offer such coverage, we are prepared to follow the federal tax guidelines accordingly. We will also administer reimbursements from employees’ FSA accounts per federal guidelines.

Please contact your BCN Partnership Manager if you have questions and, as always, employees should feel free to call our Human Resources call center if they have questions about their coverage or benefit deductions.  Contact us at 1-800-891-9911 or visit us atwww.www.bcnservices.com or email hr@www.bcnservices.com.




Frank Lewandowski, Partnership Manager

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