Last week, the Sixth Circuit upheld same-sex marriage bans in four states within the circuit, including Tennessee. After four circuit courts had struck down such bans in other areas of the country, including in Virginia, there is now an expectation that the Supreme Court will address laws banning same-sex marriage.
These opinions impact employers regarding application of workplace policies and handling of benefits. Under the Supreme Court’s 2013 Windsor opinion, same-sex spouses are married for federal tax purposes, provided they were married in a state that allows same-sex marriage. Currently for employers, this impacts qualified retirement plans.
The Sixth Circuit opinion is a 2-1 ruling with a 42-page opinion and a 21 page dissent. Most commentators expect the Supreme Court to take up the issue now that there is a split in the circuit courts. We will monitor upcoming opinions for their effect 0n workplace policies and management of employees.
Earlier this month, the IRS issued Notice 2014-19, which discusses recognition of same-sex spouses in qualified retirement plans. The notice comes after the Supreme Court opinion of U.S. v. Windsor (June 26, 2013) and states that plans are not forced to apply the requirements of the opinion retroactively. However, plans with terms inconsistent with Windsor must be amended by December 31, 2014.
This month’s Notice follows Rev. Rul. 2013-17 (Sept. 16, 2013), which provided in the federal tax context, that the terms “spouse,” “husband and wife,” “husband,” and “wife” include an individual married to a same-sex person if the individual is lawfully married. Numerous IRS statutes and treasury regulations include one or more of those terms.
IRS Notice 2014-19 only applies to qualified retirement plans. However, non-qualified plans, severance agreements, incentive plans, and other agreements often include the same terminology. Thus, employers should take care to consider other uses of these terms.
Rising health insurance premiums have plagued employers for several years. There is significant fear over future costs. Upcoming requirements under the Affordable Care Act will place employers in a position of balancing those costs with potential federal penalties.
Beginning in 2014, large employers may be penalized if they do not offer full-time employees and their dependents minimum essential coverage or offer coverage that is deemed unaffordable. A “large employer” is defined as one that has 50 or more full-time equivalent employees during the preceding calendar year. A full-time employee averages 30 or more weekly hours of work. Hours worked by part-time employees are included in the calculation. These penalties amount to $2,000 per year per full-time employee (starting with employee number 31).
Coverage is “unaffordable” when:
- the employee’s share of the premium for self-coverage is more than 9.5 percent of the employee’s modified adjusted gross household income, and
- an employee receives a subsidy for coverage through a state exchange.
If coverage is not affordable, employers may be penalized $3,000 per year per employee who receives a federal individual insurance subsidy.