Legal Alert: IRS Answers Some Outstanding Questions for Same Sex Spouses

Date   Dec 17, 2013

In Notice 2014-1 (the "Notice"), issued yesterday (December 16, 2013), the IRS has clarified certain questions regarding the way in which the rules governing cafeteria plans, FSAs, and HSAs should be applied in situations involving same sex spouses.

Since the Supreme Court's decision in United States v. Windsor holding the Defense of Marriage Act ("DOMA") to be unconstitutional, and the related guidance issued thereafter by the Internal Revenue Service (see the article linked at and our previous Legal Alerts, IRS Answers Residence Question for Same-Sex SpousesLabor Department Signs On to State-of-Celebration Rule for Same-Sex Marriages,The Windsor FICA Fix) certain questions have been left unanswered with respect to the administration of welfare plans and cafeteria plans. In Notice 2014-1 (the "Notice"), issued yesterday (December 16, 2013), the IRS has clarified certain questions regarding the way in which the rules governing cafeteria plans, FSAs, and HSAs should be applied in situations involving same sex spouses. 

Perhaps the most obvious issue concerning same sex couples for employers maintaining  cafeteria plans has been "does the Windsor decision itself constitute a ‘change in status' sufficient to allow a mid-year election change?"  In other words, can an employee who already had a same sex spouse, but who had to be treated as unmarried under the cafeteria plan rules due to the application of DOMA, change his or her election under the plan without waiting until the beginning of the next plan year? Under most plans, the literal answer would have been "no," since the plan would have defined the "change in status" events (or "special enrollment rights" trigger events) as including the employee's "marriage"; here, the employee's marriage did not occur during the year.   

However, the regulations governing the change in status rules actually include "events that change an employee's legal marital status." Even though no action was taken by the employee, the repeal of DOMA by the Windsor decision certainly changed the employee's legal marital status (under federal law), and on that basis, the Notice provides that a mid-year election change could be made at any time during the plan year that includes either July 26, 2013 (i.e., the date of the Windsor decision) or December 16, 2013 (i.e., the date of the Notice). It should be noted, however, that, since most (but not all) cafeteria plans are calendar year plans, and since it is nearly the end of the calendar year with new elections being made for the new year anyway, this is mostly a confirmation of the actions taken by those employers that already allowed changes to be made.

Cafeteria plan documents that do not already provide that "change in status" includes changes in legal marital status, or similar provisions, should be amended, if necessary to enable those elections to be made. The Notice permits such amendments to be adopted as late as the end of the plan year commencing after December 16, 2013 (i.e., by December 31, 2014 for calendar year plans), and to be effective as early as the beginning of the plan year that includes December 16, 2013.

With respect to Flexible Spending Accounts, the Notice permits reimbursement from healthcare, dependent care, or adoption assistance FSAs, as the case may be, of expenses incurred by an employee's same sex spouse (or the spouse's dependents) on or after the later of (i) the date of marriage, or (ii) the beginning of the FSA plan year that includes the date of the Windsor decision (July 26, 2013), regardless of whether the employee had elected coverage that included the spouse during that period of time. For example, under a calendar-year healthcare FSA, an employee who had elected employee-only coverage for 2013 can request and receive reimbursement (subject to applicable limitations) for expenses incurred by his or her same sex spouse since January 1, 2013 (or since their date of marriage, if later).

Finally, the Notice is not all "good" news. It does confirm that certain limitations apply in the case of same sex married couples the same way as they apply to opposite sex married couples. For example, the limitation on dependent care contributions is $5,000 on a joint return, and would prohibit the couple from contributing more than a combined total of $5,000, even to separate dependent care FSAs. Similarly, the contribution limit for HSAs – $6,450 in 2013 – applies to the total contributions made by the couple to one or more such accounts.

If you have any questions regarding this Alert, or how the Notice affects you or your plans, please feel free to contact the author of this Alert, Jeffrey Ashendorf, at, or any member of FordHarrison's Employee Benefits Practice Group.  You may also contact the FordHarrison attorney with whom you usually work.