Wednesday, June 12, 2013
If the U.S. Supreme Court strikes down DOMA, employers and other benefit plan sponsors should not only consider how defining “spouse” will effect benefits, but also how defining “child” will effect federal income tax.
Currently, employer-sponsored health coverage made available to children of an employee’s same-sex spouse “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.”
Based on an IRS FAQ, if an employee is considered to be a stepparent in the state in which the couple resides, the employee can avoid imputed income for federal tax purposes. So if DOMA is repealed, more children will be considered stepchildren and attain favorable tax status.
See Emily Erstling & Tzvia Feiertag, U.S. Supreme Court Decision on DOMA May Impact Status of Children of Same-Sex Spouses for Employee Benefits Purposes, Mondaq, June 1, 2013.