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Volume XII, Number 334

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Developments in Spousal Rights under Employee Benefit Plans (Part II)

As we reviewed in Part I of this post, the US Internal Revenue Service (IRS) recently issued Notice 2015-86 (Notice) to provide guidance on the application of federal tax law with respect to same-sex spouses for qualified retirement plans and health and welfare plans in light of Obergefell vs. Hodges, 576 U.S. ___, 133 S. Ct. 2675 (2015).

In Part II of our two-post series, we summarize the Notice’s relevant guidance related to health and welfare plans.

Health and Welfare Plans

Definition of “Spouse.”

The Notice confirms that federal tax law generally does not require health and welfare plans to offer any specific rights or benefits to the spouse of a participant, and no changes to the terms of a health and welfare plan are required as a result of Obergefell. The Notice further states that Obergefell could require changes in a plan’s operation to the extent that the decision results in a change in the group of spouses eligible for coverage under the terms of the plan. For example, where a plan covers “spouses” as defined by applicable state law and the plan administrator has determined that applicable state law has expanded to include same-sex spouses as a result of Obergefell, then the terms of the plan would require coverage of same-sex spouses as of the date of the change in applicable state law.

Mid-Year Election Change.

The Notice confirms that a cafeteria plan may permit a participant to make a mid-year election change due to a significant improvement in coverage under an existing coverage option. In this circumstance, a participant may revoke an existing election and submit a new election if same-sex spouses first become eligible for coverage under the terms of the plan during the period of coverage for any reason. This new election may be an election by a participant to add coverage for a same-sex spouse to a benefit option in which the participant is already enrolled, or an election by a participant who had not previously elected coverage to add coverage for the participant and a same-sex spouse. Such mid-year election changes may be made only if the plan is amended to permit such election changes (if not already permitted under the terms of the cafeteria plan). This amendment must be adopted no later than the last day of the plan year, including the later of (1) the date same-sex spouses first became eligible for coverage under the plan, or (2) December 9, 2015. Such an amendment may be retroactive to the date same-sex spouses first became eligible for coverage under the plan.

For more information on the Obergefell decision and the development of same-sex marriage and its impact on employee benefits, please see our July 2015 LawFlash, “US Supreme Court Rules in Favor of Same-Sex Marriage.”

Copyright © 2022 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume VI, Number 36
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About this Author

Amy Pocino Kelly, Morgan Lewis, Tax Attorney
Partner

Amy Pocino Kelly provides strategic, day-to-day guidance on employee benefits plan matters to plan sponsors, including public and private companies, tax-exempt organizations, and governmental employers. She counsels these clients on the design, governance, operation, and compliance of qualified and nonqualified retirement plans, equity and executive compensation arrangements, and welfare benefit plans. Amy also represents plan sponsors in audit and correction matters before the US Department of Labor (DOL) and the Internal Revenue Service (IRS).

215-963-5042
Saghi "Sage" Fattahian, Healthcare attorney, Morgan Lewis
Associate

Saghi (Sage) Fattahian counsels clients on all aspects of health and welfare plans. She works with clients to comply with the complicated, shifting requirements under the US Internal Revenue Code, ERISA, ACA, COBRA, HIPAA, MHPAEA, GINA, and state and local laws. She assists health and welfare plans and their sponsors with daily operations and plan administration, including preparing and maintaining plan documents and related materials; reviewing and negotiating services agreements with third parties; consulting on operational issues; and assisting with claims and appeals...

312-324-1744
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