The Defense of Marriage Act (DOMA) defines marriage at the
federal level as a legal union between one man and one woman and
excuses states from any obligation to recognize same-sex marriages
recognized in any other state. As a result, many states have
enacted so-called "mini-DOMA" laws providing that those
states will not recognize for any purpose same-sex marriages
recognized in other states.
As has been widely reported, DOMA's constitutionality is
currently under consideration by the U.S. Supreme Court in United
States v. Windsor and a decision is expected in June. If DOMA is
struck down, employers and other benefit plan sponsors should
consider the potential effects not only on the definition of
"spouse" for benefits purposes, but also the definition
Currently, if employer-sponsored health coverage is made
available to a child of an employee's same-sex spouse or
partner (who is not the child of the employee), it may result in
imputed income to the employee for federal tax purposes based on
the value of that coverage if the child does not meet certain
requirements under the Internal Revenue Code (Code). But, depending
on whether DOMA is repealed (and the effect of that repeal on state
mini-DOMA laws), a child's status may change for this
Code Section 152(f)(1) defines "child" as including
"stepson" and "stepdaughter." This definition
is used for various federal income tax purposes, including certain
fringe benefit rules, certain retiree health benefit rules and the
new shared responsibility rules relating to the age 26 mandate of
the Affordable Care Act. But what is a stepchild? Although the term
has varying definitions (or no definition at all) for various state
and federal laws, a stepchild may generally be viewed as any child
of an individual's spouse who is not also that individual's
adopted or natural child.
The IRS has issued FAQs stating that an individual is the
stepparent of the child of his or her same-sex spouse for
federal income tax purposes if he or she is the stepparent under
the laws of the state in which the couple resides. (http://www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Same-Sex-Couples).
Therefore, because a child of a same-sex spouse is already
considered to be an employee's stepchild for federal income tax
purposes if the couple resides in a state that recognizes the
employee as the stepparent, the employee can avoid having imputed
income for federal tax purposes on the value of employer-sponsored
health coverage provided to the child. If DOMA is struck down (and
depending on the impact of the decision on state mini-DOMA laws),
additional children of same-sex spouses may attain similar
favorable tax status. This status may even extend to situations
where a couple resides in a state that does not recognize the child
as a stepchild or permit same-sex marriage depending on the
specific definition of "child" in the benefit plan.
Employers and health plan administrators should start reviewing
their employee benefit plans to understand the potential impact of
a decision striking down DOMA (and the effect of that repeal on
state mini-DOMA laws) on their plans' definitions of
"children" and "stepchildren" and the changes
this may impose on plan coverage and administration.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Seyfarth Synopsis: Employers in California: be aware and prepare for new laws increasing minimum wages and mandating overtime pay for agricultural employees; expanding the California Fair Pay Act to race and ethnicity and to address prior salary consideration; imposing new restrictions on background checks and gig economy workers; and more. Small employers will be relieved the Governor vetoed expanded unpaid parental leave, but it will likely return in future sessions.
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