Mid-Year Election Changes Allowed for Coverage of Same-Sex Spouses
On December 9, 2015, the IRS issued a notice that discusses the impact of the Supreme Court's ruling in Obergefell v. Hodges on the operation of Health and Welfare Plans. This guidance relates solely to the application of federal tax law with respect to same-sex spouses. As a reminder, the IRS notice makes clear that the Obergefell decision requires states to recognize same-sex marriages, but it does not require ERISA plans to cover same-sex spouses under their plan.
Does this guidance create new requirements for plans?
No. Federal tax law doesn't require ERISA-governed plans to offer any specific benefits to a participant's spouse. In regard to non-ERISA plans, the requirement to cover spouses is determined by a review of applicable state law. Non-ERISA plans should consult their legal counsel regarding applicable state law.
What impact does this guidance have on plans that take contributions on a pre-tax basis?
This guidance clarifies the options available to plans who take contributions on a pre-tax basis, if they decide to cover same-sex spouses midyear. As a reminder, if a plan is taking contributions on a pre-tax basis, the plan is required to have a written plan document, often referred to as a cafeteria plan document or premium-only document.
Are plan participants able to change their election midyear, to add coverage of same-sex spouses?
Yes, if the cafeteria plan supports that a participant can make a change in coverage due to a significant improvement to an existing coverage option, and the employer had decided to allow coverage of same- sex spouses midyear, an employee should be allowed to adjust their pre-tax election accordingly.
What if a plan currently does not include a provision to allow election changes midyear due to significant improvements in coverage?
The IRS clarified that if a cafeteria plan does not have language that permits a participant to revoke their election due to significant improvements in coverage, the employer may amend its cafeteria plan at any time. The IRS clarified that if a cafeteria plan changes the terms of its plan midyear to allow such coverage, the cafeteria plan may permit a participant to revoke their existing election and submit a new election.
Which election changes would be allowed when an employer adds coverage of same-sex spouses midyear?
The plan may allow existing participants to change their coverage mid-year to add a sam- sex spouse and their children. A plan may also allow non-enrolled employees to elect coverage that includes coverage for themselves, their same-sex spouse and their children.
Is there a deadline for those employers who decide to amend their cafeteria plans to include this language?
Yes. An amendment must be issued no later than the last day of the plan year when the same-sex spousal coverage first became effective. Although typically not allowed, the amendment may be retroactive to the date same-sex spousal coverage was first added to the medical plan.
If you have any questions, please contact your client solutions team.
This content is being provided as an informational tool. It is believed to be accurate at the time of posting and is subject to change. It is recommended that plans consult with their own experts or counsel to review all applicable federal and state legal requirements that may apply to their group health plan. By providing this information, Meritain Health is not exercising discretionary authority or assuming a plan fiduciary role, nor is Meritain Health providing legal advice.