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Ti ».¢ Expert Analysis is a form of cafeteria plan benefit, funded by a voluntary salary reduction arrange- ment with pretax dollars. The benefits are subject to an annual maximum and an an- nual “use-or-lose” rule. Qualified medical expenses are those incurred by, among other individuals, the employee and his or her Because of DOMA, only opposite-sex married couples could use health FSA dollars for a spouse’s qualified medical expenses. opposite-sex Spouse. IMPACT. The Supreme Courts decision to strike down DOMA presumably opens the door to same-sex married couples be- ing able to use FSA dollars for qualified medical expenses of both spouses. The IRS is expected to issue guidance. COMMENT. A cafeteria plan may not allow an employee to request salary re- duction contributions for a health FSA in excess of $2,500 for plan years beginning after December 31, 2012. Health Savings Accounts. A health savings account (HSA) is a vehicle that eligible tax- payers can use to pay for or reimburse quali- fied medical expenses. Contributions to an HSA are tax-deductible (employer con- tributions are excluded from gross income) and distributions are tax-free if used to pay for qualified medical expenses. To be an eli- gible taxpayer, the individual, among other requirements, must be covered by a high-de- ductible health plan (HDHP), not enrolled in Medicare, not claimed as a dependent on another taxpayer's return. Qualified medi- cal expenses are those incurred by, among others, the taxpayer and his or her spouse. Because of DOMA, only opposite-sex mar- ried couples could HSA dollars for a spouse’s qualified medical expenses. IMPACT. With DOMA being struck down by the Supreme Court, same-sex married couples will presumably be able to use HSA dollars for qualified medical expenses of both spouses. COBRA/FMLA. Federal law requires that certain employers offer continuation of health care coverage to employees, their spouses, CCH Tax Briefing and families (“COBRA coverage’). Current federal laws related to COBRA coverage do not apply to same-sex married couples. The DOMA definition of spouse precludes the extension of Family and Medical Leave Act (FMLA) leave benefits to opposite-sex part- ners. After the Supreme Court’s decision in Windsor, these rights presumably would now be available to same-sex spouses. “The IRS is expected to provide guidance on the timing of employee benefit plan amendments, including the issue of whether benefits need to be made retroactive or only prospective.” Retirement Plans. The Internal Rev- enue Code provides extensive protections for the spouse of an employee to share in the employee's retirement benefits payable through Code Sec. 401(k) plans and other qualified plans. These protections would presumably now apply to the same-sex spouse of an employee. AFFORDABLE CARE ACT The Patient Protection and Affordable Care Act, signed into law by President Obama in 2010, set in motion a host of changes to the delivery of health care and health insur- ance coverage. Some of the changes already in place affect health savings accounts (dis- cussed above in this Briefing). Other chang- es are scheduled to take effect after 2013. Individual Mandate And Penalty. Be- ginning in 2014, the Affordable Care Act imposes a penalty on individuals who do not carry minimum essential health cov- erage for one or more months, subject to certain exceptions. Married taxpayers who file a joint return are jointly liable for any penalty that may be imposed upon either spouse. The penalty does not apply in certain cases, such as in the case of individuals whose household incomes are below their filing thresholds. Now that DOMA has been struck down, same- sex married couples presumably will be treated in the same manner as opposite- sex married couples for purposes of the individual mandate and its penalty. COMMENT. The Affordable Care Act pro- hibits the IRS from using liens or levies to collect any unpaid penalty. The IRS cannot levy on the property of one spouse to satisfy an unpaid penalty of the other spouse. Premium Assistance Tax Credit. Beginning in 2014, the Code Sec. 36B premium assis- tance tax credit is scheduled to be available to those qualified individuals and families who are not offered minimum essential cov- erage and as a result obtain coverage through a health benefit exchange. The Affordable Care Act provides for advance payment of the credit. Taxpayers who are married at the end of the tax year must file a joint return Because DOMA has been struck down, same-sex married couples to claim the credit. will presumably need to file a joint return to claim the credit. Code Sec. 45R Credit. For tax years 2010 through 2013, eligible employers may claim a credit of 35 percent of health insurance premiums paid (25 percent for small tax- exempt employers). In tax years beginning after 2013, an employer must participate in an insurance exchange in order to claim the credit. The credit is scheduled to increase to 50 percent for small business employers (35 percent for small tax-exempt employers) after 2013 (but will terminate after 2015). Certain family members are not treated as employees for purposes of the credit. Un- der DOMA, these restrictions did not apply to same-sex married couples because their marriages were not recognized for federal purposes. With DOMA’s demise, a same- sex spouse who satisfies any of these criteria would presumably not be treated as an em- ployee for purposes of the credit. ©2013 CCH Incorporated. All Rights Reserved. HOUSE_OVERSIGHT_029312