Skip to Page Content

Governmental Affairs Update-September 2013

    September 16, 2013

    Governmental Affairs Update-September 2013

    Notice 2013-17 Set to Take Effect on September 16th

    - The U.S. Treasury & Internal Revenue Service (IRS) has announced that same sex marriages will be recognized for Federal tax purposes. The IRS ruling extends the protections & benefits of the federal tax code to same sex couples. The revenue ruling (Revenue Ruling 2013-17) was issued in response to the U.S. Supreme Court's ruling in the U. S. v. Windsor which ruled unconstitutional section 3 of the Defense of marriage Act (DOMA) which had limited the application of federal laws( including tax laws) to only same sex couples. The court in Windsor stated that section 3 "undermines both public & private significance of state - sanctioned same- sex marriages". It had however left the effects of it ruling open to interpretation by individual federal departments & agencies. Revenue 2013-17 provides the IRS guidance for tax purposes. The revenue ruling examined three (3) significant issues; 1) Whether, for Federal tax purposes , the terms "spouse" , "husband & wife", "husband" & "wife" include an individual married to a person of the same sex , if the individuals are lawfully married under state law, & whether, for those purposes , the term "marriage" includes such a marriage between individuals of the same sex; 2) Whether, for Federal tax purposes, the IRS( Service) recognizes a marriage of the same -sex individual as validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the state in which they are domiciled does not recognize the validity of same sex marriages.; 3) Whether, for Federal tax purposes, the terms "spouse", "husband & wife"," husband" & "wife" includes individuals (whether of the opposite sex or same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of the state & for the same purposes, the term "marriage" includes the same relationship. The IRS made the following holdings on the 3 issues; 1) For federal tax purposes, the terms "spouse", "husband & wife" ," husband", & "wife" include an individual married to a person of the same sex if the individuals are lawfully married under state law & the term " marriage" includes such a marriage between individuals of the same sex. 2) For Federal tax purposes the Service adopts a general rule recognizing a marriage of same sex individuals that was validly entered into in state whose laws authorize the marriage of the two individuals of the same sex even if the married couple is domiciled in state that does not recognize the validity of same-sex marriages. 3) For Federal tax purposes , the terms " spouse" , husband & wife, husband , & wife do not include individuals ( whether of the opposite sex or the same sex) who have entered into a registered domestic partnership , civil union, or other similar formal relationship recognized under state law of that state, & the term "marriage" does not include such formal relationships. The ruling is to go into effect prospectively as of 9/16/2013. While the ruling is set to go into effect on 9/16, taxpayers who wish to rely on the terms of the Revenue Ruling for earlier periods may choose to do so, as long as the statute of limitations for the earlier period has not expired. The ruling indicated taxpayers may rely on it regarding the effect upon employee benefit plans that provide exclusions from income based on marital status. One immediate benefit area is section 125 cafeteria plans that allow for pre- tax salary reductions for health care coverage. Currently when coverage is elected by an employee for a same sex spouse, the coverage for the same sex spouse was on an after tax basis. That now will change to allow for the full cost of the coverage to be pre- tax. The ruling concludes with the statement that the IRS" intends to issue further guidance on the effect of the Supreme Court's decision in Windsor to other employee benefits & employee benefit plan arrangements." Source: EANE E-Alert, 9/10/2013

    Perez Calls for Hike in Minimum Wage -

    -Secretary of Labor Thomas Perez is on board with worker centers’ call for the federal minimum wage to be raised from $7.25 per hour. Source: SHRM, HR News, 9/10/2013

    ACA/ Model Exchange Notices Must Be Issued No Later than October 1st

    - The Affordable Care Act's (ACA) requirement that employers provide all full-time & part-time employees with a written notice about the Health Insurance Exchanges (now called "Marketplaces") is fast approaching. While there are model forms that have been issued, employers must nonetheless fill in company specific information to effectively communicate to their employees. Source: EANE E-Alert, 9/10/2013

    Governor Seeks Health Reform Waiver; AIM Urges Employers to Back Move

    -The governor, in a letter to Health and Human Services Secretary Kathleen Sebelius, requests a limited waiver that would allow Massachusetts to maintain the current nine rating factors in its merged individual and small-business health insurance market, and to maintain its practice of filing rates quarterly, rather than annually. The waiver is justified, according to Patrick, because the merged market has allowed Massachusetts to achieve a best-in-the-nation 97 percent insurance coverage for its citizens. Governor Patrick requested regulatory relief under terms of a bill passed by the Legislature last month requiring him to seek a waiver from the rating changes and annual rate filing. The ACA will limit to four the rating factors used to calculate small group health insurance premiums – age, family size, geographic area and tobacco use. Massachusetts law allows for additional consideration of industry, participation rate, group size, intermediary discount and group purchasing cooperatives. "Of particular concern is the adverse impact that the rating factor changes will have on small employers and their employees. A waiver of rating factor requirements will avoid increases in health insurance premiums for a large segment of our small-employer population and their employees," Patrick wrote to Sebelius. The governor maintained that Massachusetts has had a strong guaranteed issue market for small employer health insurance since 1992 and remains the only state in the nation with a merged market that includes both individuals and small businesses. The stability provided by the merged market, along with legislative and regulatory reforms, has created a favorable insurance market for small employers during the past two years, according to Patrick. A study by Massachusetts health insurance companies predicts that changes brought about by federal health care reform, independent of other rating factor changes, will raise premiums for Bay State employers by an average of 3.7 percent on top of typical base-rate increases. The study found that the rating changes could raise or lower rates for companies by up to 57 percent. "Implementing CMS-9972-F in the Commonwealth will disrupt the relative stability that the insurance market has achieved in Massachusetts since our markets merged," Patrick wrote. Governor Deval Patrick formally asked federal officials yesterday to waive provisions of the Affordable Care Act (ACA) that could raise premiums for some small Bay State employers by more than 50 percent. Source: AIM Business Insider, Posted by Rick Lord on Wed, 9/4/13

    DOL: No Fine for Not Providing Exchange Notices -

    -The Department of Labor (DOL) announced there will be no penalty imposed on employers that fail to give workers notice about available coverage under government-run health insurance exchanges. Yet DOL still urges companies to do so by Oct. 1. Sept. 13, 2013. Source: SHRM HR News, 9/13/13

    New U.S. Crackdown on Illegal Hiring Targets 1,000 Businesses

    - More than 1,000 businesses across the country have been notified in recent weeks they must submit documents for audit as part of a new U.S. government crackdown on employers suspected of hiring illegal immigrants, reports. Source: The Wall Street Journal. Atlanta Business Chronicle, 9/13/2013

    U.S. Consumer Bureau Warns Employers, Banks on Payroll Debit Cards

    - The U.S. consumer watchdog warned that employers cannot require workers to be paid using prepaid payroll cards, which are used as an alternative to traditional paychecks or directly depositing wages. Employers and banks must disclose fees associated with the cards, allow employees to check their account balances and help fix any errors. Source: Reuters, 9/12/13