1. Issues in Same Sex Marriage and Domestic Partners
Health Care Coverage
Presented by: Barry M. Newman The Wagner Law Group
© 2012 The Wagner Law Group

2. Introduction
Health care coverage major concern, spousal life, AD&D insignificant
Defense of Marriage Act (DOMA)
Federal law does not recognize same sex spouses for benefit rights or income tax purposes
Some states recognize same sex marriage and civil unions but none recognize domestic partners
One major exception for same-sex tax dependents
Presented by:
Barry M. Newman, The Wagner Law Group ,

3. Legal Requirements for Coverage
Laws
No federal requirements for coverage
Only states that may possibly require: California and Washington
Court Cases
Claims of state sexual orientation discrimination laws dismissed – ERISA preempts state laws
Claims of violation of U.S. Equal Protection Clause (non-ERISA plans) – proof of rational basis for limits
Presented by:
Barry M. Newman, The Wagner Law Group ,

4. Cafeteria Plans Choice of cash or pre-tax qualified benefits
Health coverage “qualified” only if excludable under Code
Exclusion does not apply to someone who is not a spouse or tax dependent-DOMA!!
Cafeteria plan may still have coverage for same sex spouse or domestic partner
Coverage included in federal taxable compensation; employee contribution treated as post-tax
But coverage may be exempt from state income tax
Presented by:
Barry M. Newman, The Wagner Law Group ,

5. Cafeteria Plans (cont.)
Status change rules
Allows change in pre-tax contribution election upon occurrence of certain events
Event must related to “employee,” “spouse,” or “dependent”
Partner not considered spouse under DOMA, may be dependent
Federal vs. State Law
State law may recognize while federal law does not
But allowing change in election due to event of same-sex partner could result in federal taxation or “disqualification” of cafeteria plan
Presented by:
Barry M. Newman, The Wagner Law Group ,

6. COBRA
Federal COBRA allows individuals who lose health care coverage to pay for continuation if a “qualifying event” occurs
“Qualifying event” only applies to “employee,” “spouse,” or “dependent child”
Same sex spouse would not meet any of these definitions, even if dependent
Child of same sex spouse would also not be covered unless also a child of employee
Presented by:
Barry M. Newman, The Wagner Law Group ,

7. State Continuation Laws
State insurance laws specifically not pre-empted by ERISA
State can impose continuation coverage through insurers’ requirements
New York and Massachusetts say same sex spouses are to be treated the same as other spouses
New Hampshire applies continuation to same sex spouses and civil unions
Responsibility for interpretation and implementation of state insurance continuation laws is with the insurer not the employer.
Doesn’t apply to self funded plans
Presented by:
Barry M. Newman, The Wagner Law Group ,

8. Employer Tax Considerations
Under Internal Revenue Code, employer may deduct all “ordinary and necessary” business expenses
IRS accepts same-sex, civil union, and domestic partner benefit expenses as “ordinary and necessary”
States generally follows IRS lead
Presented by:
Barry M. Newman, The Wagner Law Group ,

9. Employees’ State Tax Considerations
Many states have no established policy regarding taxation of coverage of same sex spouses, civil union partners, and domestic partners.
Existing rules are subject to change. But, currently it appears that:
Connecticut: Does not tax value of coverage paid to same sex spouse or civil union partner
Maine: Taxes value of benefits paid to same sex spouse and civil union partner
Massachusetts: Does not tax the value of coverage for same sex spouse
Presented by:
Barry M. Newman, The Wagner Law Group ,

10. Employees’ State Tax Considerations
Continued: It currently it appears that:
New Hampshire: No income tax
New York: Does not tax the value of coverage for same sex spouse
Rhode Island: Does not tax the value of coverage paid to same sex spouse, or civil union partner
Vermont: Does not tax value of coverage paid to same sex spouse, or civil union partner
Presented by:
Barry M. Newman, The Wagner Law Group ,

11. Employees’ Tax Considerations
DOMA (AGAIN!!) Feds won’t recognize same sex marriage, so
Value of coverage for same sex spouse, civil union, domestic partner is taxable to employee
Exception as dependent for Internal Revenue Code §152(d)(2)individual who:
Has principal place of abode in the home of taxpayer
Is member of taxpayer’s household
Receives over one half of his or her support from the employee
Presented by:
Barry M. Newman, The Wagner Law Group ,

12. Employees’ Tax Considerations (cont.)
WARNING!! Section Code §152(d)(2) can cause trouble for employers:
Plan defines coverage to include “spouse and dependents”
Plan refers to Internal Revenue Code for definition of dependent
Definition results in unintended coverage of certain same-sex spouses, civil union members, or domestic partners
Presented by:
Barry M. Newman, The Wagner Law Group ,

13. Employees’ Tax Considerations (cont.)
If not exempt as spouse or dependent, federal laws say the value of the individual coverage is “imputed income” to the employee
“Imputed income” is compensation to the employee subject to:
Income tax withholding
FICA
FETA
State taxes (unless there is an exception in state law)
Presented by:
Barry M. Newman, The Wagner Law Group ,

14. Calculating Imputed Income
IRS says use “fair market value” of the group health coverage for a single individual to determine imputed income.
IRS has not defined rules to determine “fair market value”
Methods to determine value:
May be able to get this information from insurer or actuary
COBRA premium for one – sometimes too expensive
Difference between:
Total premium for employee plus one
Less: total premium for employee only
Less: after tax employee payments
Any other “reasonable method”
Presented by:
Barry M. Newman, The Wagner Law Group ,