Introduction to Employee Benefits
As you develop your employee benefits program, it is vitally important to understand the laws, featured in this section, which can potentially impact your program, including Health Care Reform, COBRA (if your company has 20 or more employees), and the Family and Medical Leave Act (if your company has 50 or more employees).
Benefits for Same-Sex Spouses
Special Update: Proposed Regulations Implement Supreme Court's Same-Sex Marriage Decision for Federal Tax Purposes
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued proposed regulations providing that a marriage of two individuals, whether of the same sex or the opposite sex, will be recognized for federal tax purposes if that marriage is recognized by any state, possession, or territory of the United States. The proposed regulations implement the Supreme Court's 2015 decision in Obergefell v. Hodges, which held that states are required to license a marriage between two people of the same sex, and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state.
Federal agencies issued the following guidance implementing the June 2013 U.S. Supreme Court decision that invalidated part of the Defense of Marriage Act (DOMA), which denied federal benefits to legally married same-sex couples:
- Employee Benefit Plans. The terms "spouse" and "marriage" in Title I of ERISA and in related agency regulations will generally be read to include same-sex couples legally married in any state that recognizes such marriages, regardless of where they currently live. Among other provisions, Title I includes COBRA continuation coverage requirements and the HIPAA portability rules.
- Federal Tax Guidance. Same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for all federal tax purposes (including employee benefits). More specific IRS guidance includes:
- Q&As regarding the participation by same-sex spouses in cafeteria plans, HSAs, and health FSAs;
- Notice 2013-61 establishing special procedures for correcting overpayments with respect to employee benefits provided to same-sex spouses (including employer-provided health coverage); and
- Q&As on how the ruling affects qualified retirement plans.
- FMLA Guidance. Under a final rule effective March 27, 2015, the FMLA regulatory definition of "spouse" is based on the law of the place where the marriage was entered into, sometimes referred to as the "place of celebration" (the current regulatory definition of "spouse" only applies to same-sex spouses who reside in a state that recognizes same-sex marriage).
For guidance on same-sex marriage laws specific to your state, visit our State Laws section, click on your state, and select "Same-Sex Relationships" from the left-hand navigation menu.
Types of Employee Benefits
There are two types of employee benefits:
- Those the employer must provide by law; and
- Those the employer offers as an option to compensate their employees.
Examples of required benefits include Social Security and workers' compensation, while optional benefits include health care and retirement. Both required and optional benefits have both legal and tax implications for the employer.
Employee Benefits Legal Compliance
While employers largely have discretion to choose what benefits to offer their employees, and how, employee benefits are also highly regulated by law. Thus, as employers explore the Employee Benefits section, they should keep the following ideas in mind:
- Which benefits must be provided by law to employees- such as family and medical leave and continuation of health coverage- and which benefits are voluntary.
- For each benefit, determining who is a covered employer, and who is a covered employee, keeping in mind whether your workers are properly classified as independent contractors or employees.
- Knowing whether the benefits you provide are regulated by federal and/or state law. For example, health coverage and retirement plans, while optional, are both governed by the federal Employee Retirement Income Security Act (ERISA). Health insurance is further subject to a variety of other federal laws, including the Affordable Care Act (Health Care Reform), and state laws that add to or expand federal law.
- Finally, employers should understand the tax consequences of employer-provided benefits, such as cafeteria plans.
The Employee Benefits section includes:
For more on each of these topics, please click on the appropriate link above or at left.