Tech Flex. Topics Covered in this Issue:

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1 January 2014, Issue I Tech Flex Topics Covered in this Issue: Benefits: New Guidance Via FAQs Released Regarding ACA Provisions Proposed Regulations Issued to Amend Excepted Benefit Rules Payroll: IRS Releases 2014 Publication Publication 15-B Released IRS Releases 2014 Form W-4 New Mexico Legalizes Same-Sex Marriage Question of Same-Sex Marriage Not Yet Settled in Utah Three More States Release Guidance on Same-Sex Spouse Taxation Leave: DOL Announces Plans to Amend FMLA Definition of Spouse

2 NEW GUIDANCE VIA FAQS RELEASED REGARDING ACA PROVISIONS On January 9, 2014, the United States Departments of the Treasury, Labor and Health and Human Services released Frequently Asked Questions About the Affordable Care Act Implementation Part XVIII and Mental Health Parity Implementation (FAQ) regarding the preventive care, cost-sharing requirements, wellness program, expatriate plans and mental health parity provisions of the Affordable Care Act (ACA) and the Mental Health Parity and Addiction Equity Act (MHPAEA). Some of the highlights of the FAQ Part XVIII are as follows: Preventive Care: Under the ACA, non-grandfathered health plans and non-grandfathered health insurance coverage in the individual market must provide coverage for certain preventive care services, including colonoscopies, immunizations and mammograms, and must not impose any cost-sharing requirements on these services. In addition, the coverage provided for these services must be consistent with published recommendations and guidelines from the United States Preventive Services Task Force (USPSTF), the Centers for Disease Control and Prevention Advisory Committee on Immunization Practices (ACIP) and the Health Resources and Services Administration (HRSA). The preventive care FAQ addresses what changes plans must make to comply with the new recommendations the issued by the USPSTF on September 24, 2013 in relation to breast cancer. The new USPSTF recommendations stipulate that clinicians should engage in shared, informed decision making with women who are at increased risk for breast cancer about medications to reduce their risk and where risk factors permit prescribe risk-reducing medications such as tamoxifen or raloxifene. The FAQ provides that for plan or policy years beginning on or after September 24, 2014, nongrandfathered group health plans and non-grandfathered health insurance coverage offered in the individual or group market will be required to cover such medications for women who are at an increased risk of breast cancer without cost sharing subject to reasonable medical management. 2

3 Limitations on Cost-Sharing The ACA states that any annual cost-sharing imposed under a non-grandfathered group health plan must not exceed certain limitations on out-of-pocket costs. For plan or policy years beginning in 2014, these limits are $6,350 for self-only coverage and $12,700 for coverage other than self-only coverage. The limitation on out-of-pocket costs to participants may be increased annually by the premium adjustment percentage allowed under the ACA. Previously, FAQ Part XII provided guidance on out-of-pocket maximums for the first year of applicability where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket costs. FAQ XII generally provided that, for group health plans and group health insurance issuers that utilize more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket costs, only for the first plan year beginning on or after January 1, 2014 (first year of applicability), the Departments would consider the annual limitation on out-of-pocket costs to be satisfied if: The plan complied with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage). To the extent that the plan or any health insurance coverage includes an out-ofpocket maximum on coverage that does not consist solely of major medical coverage, that out-of-pocket maximum does not exceed the ACA allowed dollar amounts. FAQ Part XVIII further clarifies the following in relation to ACA cost sharing provisions. Non-grandfathered plans and issuers are required to apply the out-of-pocket maximum across all essential health benefits for plan years beginning on or after January 1, Where the benefits are not essential health benefits, plans are not required to apply the ACA out-of-pocket limits. Plans, such as those with multiple service providers, may divide the annual limit on out-of-pocket costs across multiple categories of benefits, rather than reconcile claims across multiple service providers if the combined out-of-pocket maximum for the year does not exceed the annual out-of-pocket cost limitation. 3

4 If a plan includes a network of providers the plan may, but is not required to, count an individual's out-of-pocket expenses for out-of-network items and services toward the plan's annual maximum out-of-pocket limit. A plan may, but is not required to, count an individual's out-of-pocket costs (costsharing) for non-covered items or services (e.g. cosmetic surgery) toward the plan's annual maximum out-of-pocket limit. Cost sharing includes items such as deductibles, coinsurance and co-payments. Expatriate Plans Previously released FAQ Part XIII provided temporary transitional relief regarding the extent to which the health coverage provided to an expatriate is subject to the ACA requirements. The new guidance provides additional clarification of the definition of an insured expatriate health plan for purposes of the relief provided as well as the scope of the relief provided. FAQ Part XVIII defines insured expatriate health plan for the purposes of applying the temporary transition relief as an insured group health plan with respect to which enrollment is limited to primary insureds for whom there is a good faith expectation that such individuals will reside outside of their home country or outside of the United States for at least six months of a 12-month period and any covered dependents, and also with respect to group health insurance coverage offered in conjunction with the expatriate group health plan. The 12-month period can fall within a single plan year or across two consecutive plan years. In relation to the scope of the relief provided to expatriate plans, it is stated that insured expatriate health plans can rely on the temporary transitional relief for plan years ending on or before December 31, Wellness Programs In June of 2013, final regulations were released regarding nondiscriminatory wellness programs. These final regulations increased the maximum awards under a healthcontingent wellness program to 30 percent (from 20 percent) and 50 percent for programs designed to prevent or reduce tobacco use. Rewards can be used among other options to reduce the employee s major medical premiums or increase the employer s contribution to a health flexible spending account, health reimbursement arrangement, or health savings account. The newly provided FAQ provides the following addition guidance on wellness programs. 4

5 If a participant is given a reasonable opportunity to enroll in the employer s tobacco cessation program at the commencement of the plan year (thus establishing eligibility for a reward such as avoiding a tobacco use surcharge) and fails to do, the plan is not required to provide the employee with another opportunity to earn the reward until renewal or reenrollment for coverage for the next plan year. However, there is no prohibition on a plan or issuer allowing rewards (including pro-rated rewards) for mid-year enrollment in a wellness program. In the case where a participant's doctor has advised that an outcome-based wellness program's standard for obtaining a reward is medically inappropriate for the plan participant, and suggests a weight reduction program (an activity-only program) instead, the plan must provide a reasonable alternative standard that accommodates the recommendations of the individual's personal physician with regard to medical appropriateness, and the participant should discuss the different possible programs with the plan. Plans and issuers may modify the model language included in the final regulations that communicates the availability of a reasonable alternative standard, provided that the notice includes the required content as set out in the final regulations. Mental Health Parity In November of 2013, final regulations were released for the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) to be effective for plan and policy years commencing on or after July 1, FAQ Part XVIII provides increased clarity regarding the effect of the ACA on the MHPAEA in relation to individual and small group market coverage. Specifically that mental health and substance use disorder are one of the ten essential health benefit (EHB) categories and that non-grandfathered health plans in the individual and small group markets are required to comply with the requirements of the parity regulations. Furthermore, the ACA provides MHPAEA protections to the entire individual market for both grandfathered and non-grandfathered coverage. Non-grandfathered individual market coverage: For policy years beginning on or after January 1, 2014, all non-grandfathered individual market coverage that is not otherwise subject to the HHS transitional policy must include coverage for mental health and substance use disorder benefits and that coverage must comply with interim final 5

6 regulations issued in February Compliance with the final regulations issued in November 2013 is required for policy years beginning on or after July 1, For grandfathered individual market coverage: Grandfathered individual health insurance coverage is not subject to the EHB requirements and therefore is not required to cover mental health or substance use disorder benefits. However, to the extent mental health or substance use disorder benefits are covered under the policy, coverage must comply with the MHPAEA final regulations for policy years beginning on or after July 1, For non-grandfathered small group market coverage: For plan years beginning on or after January 1, 2014, all non-grandfathered small group market coverage that is not otherwise subject to the HHS transitional policy must include coverage for mental health and substance use disorder benefits and that coverage must comply with interim final regulations issued in February Compliance with the final regulations issued in November 2013 is required for plan years beginning on or after July 1, The FAQ also noted that grandfathered small group market coverage is not required to comply with either the EHB provisions or MHPAEA. For a copy of FAQ XVIII please click on the link provided below: PROPOSED REGULATIONS ISSUED TO AMEND EXCEPTED BENEFIT RULES On December 24, 2013, the Internal Revenue Service (IRS), Department of Labor (DOL) and Health and Human Services (HHS) (the Departments) published proposed regulations that would, if adopted, amend the regulations regarding excepted benefits under various federal laws including the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA). The proposed regulations issued by the Departments, according to the preamble, would level the playing field between insured and self-insured coverage, by eliminate[ing] the requirement under the HIPAA regulations that participants pay an additional premium or 6

7 contribution for limited-scope vision or dental benefits to qualify as benefits that are not an integral part of a plan (and therefore as excepted benefits). In addition, the proposed regulations would add two new classes of excepted benefits. Specifically, employee assistance plans (EAP s) and wraparound coverage. Employer-provided wraparound coverage would be considered an excepted benefit if it is used to provide limited additional coverage to individuals (and families) who are otherwise eligible to enroll in the employer s group health plan, but instead enrolled in non-grandfathered individual health insurance. The proposed regulations are intended to allow a plan sponsor to maintain comparable level of benefits for all potential enrollees including those enrollees for whom the employer-provided group health plan is unaffordable. By way of background, excepted benefits are exempt from certain HIPAA mandates applicable to group health plans such as enrollment rights and the requirement to provide certificates of creditable coverage upon the loss of coverage. In addition, excepted benefits are not subject to certain ACA mandates such as coverage of children to age 26, the prohibition against waiting periods exceeding 90 days, enhanced claims and appeals rules, annual dollar-limit prohibition, and the requirement to provide first dollar preventive care coverage. Furthermore, excepted benefits are also exempt from the ACA transactional reinsurance program (TRP) and Patient-Centered Outcomes Research Institute (PCORI) fees. Please find below a brief discussion of some of the highlights of the proposed changes. Elimination of Separate Contribution Condition for Dental/Vision/LTC Benefits Under the current regulations, self-insured dental, vision or long term care (LTC) coverage may be considered to be an excepted benefit only if (a) employees can elect not to receive the coverage and (b) those electing the coverage must pay an additional contribution. Under the proposed regulations, the requirement that an employee must be able to not elect the benefit would remain but would eliminate the additional contribution requirement. It is important to note that insured dental, vision and LTC coverage would continue to be an excepted benefit if it is offered under a separate policy of insurance, without regard to participant contributions. 7

8 New Exception for EAPs Not Providing Significant Medical Benefits Under the proposed regulations, EAPs are considered excepted benefits if the following conditions are met: (1) the EAP does not provide significant benefits in the nature of medical care ; (2) EAP eligibility is not dependent upon participation in another group health plan, (3) no employee contribution can be required as a condition of participation in the EAP; and (4) there is no cost sharing under the EAP. The proposed regulations are intended to permit employers to continue to offer limited benefits through an EAP while not subjecting the EAP to ACA and/or disqualifying an individual from eligibility for a premium tax credit when enrolling in an exchange. New Exception for Limited Wraparound Coverage A new type of excepted benefit would be added to the current excepted benefits referred to as limited wraparound coverage. The type of employer-provided wraparound coverage that would qualify as excepted refers to additional coverage provided to individuals (and families) who choose to enroll in non-grandfathered individual health insurance coverage instead of the employer s group health plan, in part because the employer-provided group health plan is unaffordable. The Proposed Regulations for wraparound coverage would be effective for plan years starting in 2015, and the following requirements would need to be met in order for the coverage to be considered an excepted benefit: The wraparound plan must wrap around a non-grandfathered individual health insurance plan that does not consist solely of excepted benefits. The wraparound plan covers benefits or providers not covered by the individual health insurance coverage. o The wraparound coverage must provide coverage for benefits that are not essential health benefits, or reimburse the cost of health care providers that are considered out-of-network under the individual health insurance coverage, or both. The wraparound coverage may also provide benefits for participants' otherwise applicable cost sharing under the individual health insurance policy. o The wraparound coverage must not provide benefits only under a coordination-of-benefits provision. An employer that sponsors the wraparound coverage must also sponsor another group health plan ( primary plan ) meeting the "minimum value" requirement 8

9 (pays at least 60% of expenses) requirement and that is affordable for a majority of eligible employees (cost not exceeding 9.5% of employee s household income). Only individuals eligible for the primary plan may be eligible for the wraparound coverage. The total cost of coverage under the wraparound coverage must not exceed 15 percent of the cost of coverage under the primary plan. For this purpose, the cost of coverage includes both employer and employee contributions towards coverage and is determined in the same manner as an applicable premium is calculated under a Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation provision. The wraparound plan must be nondiscriminatory as evidenced by the following requirements: o The wraparound coverage must not differentiate among individuals in eligibility, benefits, or premiums based on any health factor of an individual or dependent; o The wraparound coverage must not impose any preexisting condition exclusions; and o Neither the primary plan nor the wraparound plan may be discriminatory under applicable nondiscrimination rules for insured or self-insured group health plans that apply in determining whether benefits discriminate in favor of highly compensated individuals. The proposed regulations if adopted as final are to be effective for plan years commencing in However, until rulemaking is finalized, through at least 2014, the Departments will consider dental and vision benefits, and EAP benefits, meeting the conditions of these proposed regulations to qualify as excepted benefits For a copy of the portion of the December 24, 2013 Federal Register addressing the proposed modification to the excepted benefit rules please click on the link provided below. 9

10 IRS RELEASES 2014 PUBLICATION 15 The Internal Revenue Service has released Publication 15 (a/k/a Circular E) Employer s Tax Guide for use in Publication 15 explains an employer s tax responsibilities and contains the final 2014 federal income tax percentage method and wage bracket withholding tables, important updates for 2014, and employer instructions for payroll and non-payroll tax withholding. Some of the highlights of the 2014 Publication 15 are as follows: Social security and Medicare tax for The social security tax rate is 6.2% each for the employee and employer, unchanged from The social security wage base limit is $117,000.The Medicare tax rate is 1.45% each for the employee and employer, unchanged from There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Same-sex marriage. For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. For more information, see Revenue Ruling , I.R.B. 201, available at Notice provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Notice , I.R.B. 432, is available at Additional Medicare Tax withholding. In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. For a copy of the Publication 15 please click on the link provided below: 10

11 2014 PUBLICATION 15-B RELEASED The Internal Revenue Service (IRS) has released the 2014 version of Publication 15-B (Employer's Tax Guide to Fringe Benefits), which contains information for employers on the employment tax treatment of various fringe benefits, including accident and health coverage, adoption assistance, company cars and other employer-provided vehicles, dependent care assistance, educational assistance, employee discount programs, group-term life insurance, moving expense reimbursements, health savings accounts (HSAs), and transportation (commuting) benefits. (Publication 15-B uses the term "employment taxes" to refer to federal income tax withholding as well as Social Security and Medicare (FICA) and federal unemployment (FUTA) taxes.) Publication 15-B is a supplement to Publication 15 (Circular E). A few of the highlights under What s New are as follows: Cents per mile rule. The business mileage rate for 2014 is 56 cents per mile. You may use this rate to reimburse an employee for business use of a personal vehicle, and under certain conditions, you may use the rate under the cents-per-mile rule to value the personal use of a vehicle you provide an employee. Qualified parking exclusion and commuter transportation benefit. For 2014, the monthly exclusion for qualified parking is $250 and the monthly exclusion for commuter highway vehicle and transit passes is $130. For a copy of IRS Publication 15-B Employer's: Tax Guide to Fringe Benefits (For Benefits Provided in 2014), please click on the link provided below: IRS RELEASES 2014 FORM W-4 The Internal Revenue Service released the 2014 version of the Employee s Withholding Allowance Certificate (commonly known as Form W-4). Form W-4 provides the information necessary for the employer to determine the amount to withhold from the employee s wages for federal income tax (FIT). The information provided on Form W-4 includes the number of withholding allowances the employee is claiming, his or her marital status and any additional amounts the employee wishes to have withheld. This information in conjunction with the withholding methods and tables presented in Publication 15 determine the amount of FIT that should be withheld from an employee s pay. 11

12 The instructions to the Form W-4 noted that employees who claimed exempt status in 2013 and wish to continue their exempt status for 2014 must submit a new form to their employer claiming exempt no later than February 17, Should an employee whose exempt status expires on February 17 fail to submit a new form, the employer must withhold based on the last Form W-4 for the employee that did not claim exempt from withholding or, if a Form W-4 was not filed, then the employer must withhold as if the employee is single claiming no withholding allowances until the employee submits a new Form W-4. For a copy of the 2014 Form W-4 and Instructions, please click on the link provided below: NEW MEXICO LEGALIZES SAME-SEX MARRIAGE On December 19, 2013, the New Mexico Supreme Court legalized same-sex marriage in the state. Justice Edward L. Chavez writing for the court in its unanimous decision stated that we hold that the State of New Mexico is constitutionally required to allow same-gender couples to marry and must extend to them the rights, protections and responsibilities that derive from civil marriage under New Mexico law. " With that ruling, New Mexico is one of 17 states and the District of Columbia in allowing same-sex marriage. New Mexico state Attorney General Gary King stated that the ruling goes into effect immediately. 12

13 QUESTION OF SAME-SEX MARRIAGE NOT YET SETTLED IN UTAH The question of whether same-sex marriage will be allowed in the state of Utah has yet to be determined. Over the past few weeks there have been various court actions (as described below) that have allowed same-sex marriage and those which have temporarily halted further same-sex marriages. In addition, there have been announcements both by the state and the federal government in relation to the recognition of same sex couples who recently married. United States District Court for the District of Utah Central Division In March of 2013, three same-sex couples filed suit in federal court to challenge the constitutionality of the ban on same-sex marriage in Utah passed by the voters in On December 20, 2013, the United States District Court for the District of Utah Central Division ruled that the Utah ban on same-sex marriage was unconstitutional. Subsequently, on December 23, 2013, the same court denied the state s request to halt same-sex marriage until the appeals process plays out. Utah appealed that decision to the Tenth Circuit Court of Appeals in Denver. Tenth Circuit Court of Appeals On December 24, 2013, the Tenth Circuit Court of Appeals denied Utah s request to halt same-sex marriage until the appeals process had been completed. According to the 10 th Circuit order, the state failed to demonstrate it was suffering "irreparable harm" as a result of the legalization of same-sex marriage and also failed to show it had a "significant likelihood" of prevailing in its appeal to the circuit court. Utah appealed that ruling to the United States Supreme Court. In appealing the Tenth Circuit ruling, Utah argued that allowing the marriages to go forward while the case was still being heard was "an affront... to the interests of the state and its citizens in being able to define marriage through ordinary democratic channels." United States Supreme Court On January 6, 2014, the United States Supreme Court issued a temporary stay on same-sex marriage in the state of Utah. The Supreme Court issued an order stipulating that same-sex couples cannot marry in Utah until the Tenth Circuit Court of Appeals can rule on the appeal. The Tenth Circuit Court of Appeals has agreed to hear the case on an expedited schedule. 13

14 Utah Announces State Will Not Recognize Same-Sex Marriage On January 9, 2014, Utah Governor Gary Herbert s office provided direction to state agencies on the status of same-sex marriages stipulating that Utah will not recognize the hundreds of same-sex marriages that were temporarily allowed by a federal judge's ruling but before the Supreme Court issued an injunction. The directive to the state agencies stated in part as follows: After the district court decision was issued on Friday, December 20th, some same-sex couples availed themselves of the opportunity to marry and to the status granted by the state to married persons. This office sent an to each of you soon after the district court decision, directing compliance. With the district court injunction now stayed, the original laws governing marriage in Utah return to effect pending final resolution by the courts. It is important to understand that those laws include not only a prohibition of performing same-sex marriages but also recognizing same-sex marriages. Based on counsel from the Attorney General's Office regarding the Supreme Court decision, state recognition of same-sex marital status is ON HOLD until further notice. Please understand this position is not intended to comment on the legal status of those same-sex marriages that is for the courts to decide. The intent of this communication is to direct state agency compliance with current laws that prohibit the state from recognizing same-sex marriages. It is important to note that on October 9, 2013, the Utah State Tax Commission announced that same-sex couples must file a Utah income tax return with a filing status of single or head of household stating as follows: A taxpayer impacted by this IRS ruling must provide the same federal income tax information on the Utah return that the taxpayer would have provided prior to the IRS ruling. For the purposes of calculating their Utah income tax liability, these individuals must re-compute their federal income tax liability as single or head of household. The information on this re-computed federal income tax return will be used only to prepare the Utah income tax return. For a copy of the entire directive please click on the link provided below: 14

15 Federal Government Announces Recognition of Same-Sex Marriages Already Performed in Utah On January 10, 2014, United States Attorney General Eric Holder issued a statement providing that the Obama administration will recognize for purposes of federal law more than 1,300 same-sex marriages that were performed in Utah between the dates when a United States District Court ruled that the Utah ban on same-sex marriage was not constitutional and declined to prohibit same-sex marriage in Utah until Utah appeals could be heard and decided (December 19, 2013) and the United States Supreme Court issued a temporary stay on same-sex marriage in the state of Utah (January 6, 2014). Holder stated that the same-sex marriages already performed in Utah will be recognized as lawful and considered eligible for all relevant federal benefits on the same terms as other same-sex marriages. The entire text of Holder s statement is as follows: Last June, the Supreme Court issued a landmark decision in United States v. Windsor holding that Americans in same-sex marriages are entitled to equal protection and equal treatment under the law. This ruling marked a historic step toward equality for all American families. And since the day it was handed down, the Department of Justice has been working tirelessly to implement it in both letter and spirit moving to extend federal benefits to married same-sex couples as swiftly and smoothly as possible. Recently, an administrative step by the court has cast doubt on same-sex marriages that have been performed in the state of Utah. And the governor has announced that the state will not recognize these marriages pending additional court action. In the meantime, I am confirming today that, for purposes of federal law, these marriages will be recognized as lawful and considered eligible for all relevant federal benefits on the same terms as other same-sex marriages. These families should not be asked to endure uncertainty regarding their status as the litigation unfolds. In the days ahead, we will continue to coordinate across the federal government to ensure the timely provision of every federal benefit to which Utah couples and couples throughout the country are entitled regardless of whether they are in same-sex or opposite-sex marriages. And we will continue to provide additional information as soon as it becomes available. For a copy of Attorney General Holder s statement containing a video recording please click on the link provided below. 15

16 THREE MORE STATES RELEASE GUIDANCE ON SAME-SEX SPOUSE TAXATION As noted in recent editions of Tech Flex, Revenue Ruling issued by the Internal Revenue Service (IRS) provides that same-sex couples who are legally married under any law (domestic or foreign) that recognizes same-sex marriage are considered married for federal tax purposes regardless of whether the couple resides in a state recognizing same-sex marriage; states are free to determine the state taxation status of same-sex couples. Consequently, same-sex couples may be considered married for federal tax purposes but single for state tax calculation. Since that time a number of states have released guidance regarding state taxation issues in relation to same-sex spouses. These include Arizona, California, Colorado, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Missouri, Minnesota, Mississippi, Nebraska, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, Utah, Virginia and Wisconsin. The states of Alabama, Montana and South Carolina have now released guidance in relation to same-sex marriage and state taxation as discussed below. Alabama: The Alabama Department of Revenue has announced in part the following in relation to same-sex marriage and Alabama state taxation. Although same-sex couples may file a joint federal income tax return, Alabama law explicitly prohibits recognition of same-sex marriage. Therefore, in accordance with Alabama law, same-sex couples cannot file a joint Alabama income tax return Each individual member of the same-sex couple must file his or her Alabama income tax return separately, using the filing status of single or, if qualified, head of household and using the appropriate Form 40 A, Form 40 or Form NR (non-resident) return For a copy of the complete Alabama announcement please click on the link provided below. 16

17 Montana: The Montana Department of Revenue has issued a Memorandum titled Discussion of Same Sex Marriage which provides in part as follows: The IRS recently issued a revenue ruling that recognized same-sex marriages for federal tax purposes. This basically means that same sex couples with a valid marriage can file a joint federal tax return Because the State Constitution defines a marriage as one that is between one man and one woman, the Montana Department of Revenue cannot follow this federal guidance Like any law, the Department of Revenue expects taxpayers to honor all of Montana s tax laws. When asked if a same sex couple can file a joint state tax return, we will advise that it is not a valid filing option in Montana South Carolina: On January 2, 2014, the South Carolina Department of Revenue released Draft Revenue Ruling No. 13 explaining that same-sex married couples who file joint federal income tax returns must file their state income tax returns as single or head of household because the state does not recognize same-sex marriage. Draft Revenue Ruling No. 13 provides in part as follows: Question: How do individuals in a same-sex marriage recognized by the Internal Revenue Service (IRS) file their South Carolina income tax returns? Conclusion: South Carolina does not recognize same-sex marriages. Same-sex couples considered married for federal income tax purposes must use a filing status of single or, if applicable, head of household for South Carolina income tax purposes and prepare their South Carolina returns as though they are single. For a copy of Draft Revenue Ruling No. 13 please click on the link provided below. 17

18 DOL ANNOUNCES PLANS TO AMEND FMLA DEFINITION OF SPOUSE The Department of Labor (DOL) has announced plans to amend the definition of spouse under the Family Medical Leave Act (FMLA). Currently, the FMLA defines a spouse as a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides (not where the employee works). Consequently, an employee is not entitled to take FMLA for his/her same-sex spouse if the employee resides and or/works in states that do not recognize same sex marriages, even though the employee is married in a state that sanctions same sex marriage. The DOL stated that it plans to revise the regulatory definition of spouse under the FMLA in order to fully implement the Supreme Court s decision (in Windsor). For a copy of the DOL announcement please click on the link provided below. Please contact ADP National Account Services for further information at: th Ave. West Suite 600 Lynnwood, WA Phone: (425) Fax: (425) ADP National Account Services does not make any representation or warranty that the information contained in this newsletter, when used in a specific and actual situation, meets applicable legal requirements. This newsletter is provided solely as a courtesy and should not be construed as legal advice. The information in this newsletter represents informational highlights and should not be considered a comprehensive review of legal and compliance activity. Your legal counsel should be consulted for updates on law and guidance that may have an impact on your organization and the specific facts related to your business. **Please note that the information provided in this document is current as of the date it is originally published.** 18