Q&A on IRS and Department of Labor Announcements Impacting Same-Sex Married Couples
Q: In the July 2014 case Bostic v. Schaefer, the Fourth Circuit Court of Appeals ruled that Virginia laws banning same-sex marriage, and those declining to recognize valid same-sex marriages from other states, were unconstitutional. In October 2014, the Supreme Court declined to hear an appeal of the Bostic decision. As a result of this denial, the Fourth Circuit's ruling in Bostic went into legal effect on October 6, 2014, thereby legalizing same-sex marriage in Virginia and recognizing valid same-sex marriages from other states.
Now that Virginia recognizes marriage between same-sex couples, what impact does that have on W&L employee benefits and leaves?
A: Following the implementation of the Bostic decision on October 6, 2014, all same-sex marriages in Virginia will be treated exactly the same as opposite-sex unions under the law. Same-sex spouses, whether married in Virginia or in another state, will be entitled to identical treatment with regard to benefits and leaves as opposite-sex spouses.
Q: What about federal tax treatment of W&L-provided health and welfare benefits, and premiums paid for same-sex spousal benefits?
A: Under a 2013 IRS revenue ruling, a same-sex marriage will be treated as a marriage for all federal tax purposes where marriage is a factor. This includes employee benefits, tax filing status, claiming personal and dependency exemptions, taking the standard deduction, contributing to an IRA and claiming the earned income tax or child tax credit. This means that the federal tax advantages of coverage for employer-sponsored health insurance and other benefits are now available to a same-sex spouse on the same basis as opposite-sex spouses. Employees who had federal income imputed to them based on the value of their same-sex spouse's dental and/or health insurance coverage can recover federal income tax paid on the value of that spousal coverage, for all the years for which the period of limitations for filing a claim for refund is open. Generally, a taxpayer may file a claim for refund for three years from the date the return was filed or two years from the date tax was paid, whichever is later. So, if W&L provided health or dental coverage for an employee's same-sex spouse, the employee may claim a refund of federal income taxes paid on the value of coverage that would have been excluded from income had the employee's spouse been recognized as the employee's legal spouse for tax purposes. This would be done by filing an amended Form 1040. Similarly, for premiums for spousal coverage that an employee paid on an after-tax basis for coverage on the employee's same-sex spouse, the employee may also seek a refund of federal income taxes paid on the premiums for the coverage of the employee's spouse. This would also be done by filing an amended Form 1040 (for the same period of years explained in the above paragraph).
Q: Is Virginia going to afford a similar refund of state income taxes paid on premiums for coverage of an employee's same sex-spouse for marriages that were valid in other states but not recognized in Virginia before October 6, 2014?
A: In these early days after the court decision legitimizing same-sex marriage in Virginia, we have no information on whether the Virginia Department of Taxation will provide for such tax relief, but we will post that information if/when it is announced.
Q: Is FMLA leave now available for married same-sex couples just as it is for married opposite-sex couples?
A: Yes. The Department of Labor has recently clarified that, under its 2009 regulations, a "spouse" is a husband or wife as defined or recognized under State law for purposes of marriage in the State where the employee resides, NOT where the marriage took place. Because Virginia now allows same-sex marriages, and also recognizes such marriages performed elsewhere, FMLA benefits are now extended to same-sex spouses who reside in Virginia.
Similarly, other federal benefits that follow a "state of residence" definition for "spouse," such as those under Veteran's Affairs and the Social Security Administration, are now available to same-sex couples in Virginia following Bostic.
Furthermore, Washington and Lee extends the same benefits to qualified domestic partners that the University extends to spouses. Therefore the University will provide equivalent leave to employees with unmarried domestic partners who would not otherwise qualify under the FLMA.
Q: What about retirement plan impacts?
A: W&L's defined contribution retirement plan, and the university's retiree health plans, will treat same-sex spouses as spouses for purposes of benefits under the plan, even if the married couple lives in a jurisdiction that does not recognize the validity of same-sex marriages.
Updated November 2014