In 2013, in the case United States v. Windsor, the Supreme Court overturned a key portion of the Defense of Marriage Act, a federal law that prohibited gay marriage. But the ruling wasn’t about sex; it was about money. The ruling had tremendous ramifications for the financial universe inhabited by same-sex couples, and the implications of it are still being sorted out.
The ruling had a great effect on how gay and lesbian couples receive workplace benefits. Lianne Sullivan-Crowley, vice president of human resources for Princeton University, will give a talk on the subject on Monday, February 9, at 6 p.m. at the Princeton Hyatt Regency at a dinner meeting of the Princeton Human Resources Management Association. The talk is titled “A Post-Windsor World: Meeting the Financial Wellness Challenges of the LGBT Community.”
Sullivan-Crowley has been VP of HR at Princeton since 2005 as part of a 20-year career in academic human resources that included posts at Harvard and Smith College. But she not only oversees benefits for LGBT couples at her job, she is affected by them. Sullivan-Crowley traveled to Massachusetts days after the state’s gay marriage law passed to marry her partner, Julie. The couple has two daughters.
Sullivan-Crowley is not the only expert who is still grappling with the implications of the Windsor decision. A year after the case Prudential Financial published a white paper about Windsor and the financial lives of LGBT couples. The paper included a checklist of the effects of the law.
Workplace benefits: healthcare. Check to see whether you or your spouse can receive better or less expensive healthcare benefits by joining the other’s workplace plan.
Federal tax returns. Consider filing amended returns as you may be able to claim a refund for federal taxes paid on imputed income related to healthcare benefits previously purchased for a same-sex spouse.
Tax-favored healthcare accounts. Consider using Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs), and Health Savings Accounts (HSAs) for qualified healthcare expenses of a same-sex spouse.
Workplace benefits: retirement plans. If you participate in a defined benefit pension plan at work, review your beneficiary designation to ensure it reflects your current intention. If you have named a non-spouse beneficiary, your spouse must provide written consent, as non-spouse beneficiary designations done without consent will be deemed invalid.
Defined contribution plans (e.g., 401(k)s). Review your beneficiary designation to ensure it reflects your current intention. If you have named a non-spouse beneficiary, your spouse must provide written consent, as non-spouse beneficiary designations done without consent will be deemed invalid.
Other workplace benefits: Group life insurance. Consider enrolling your spouse for voluntary group life insurance if your employer makes it available.
Dependent Care Flexible Spending Accounts. If you and your spouse both utilize these accounts, recognize that the maximum that can be deposited each year is reduced from $10,000 (for two single individuals) to $5,000 (for a married couple).
Miscellaneous benefits. Review additional employee benefits such as retirement planning services, employee discounts, and the use of certain employer-provided athletic facilities, to see if your spouse can utilize them.
Financial planning: individual healthcare. If applying for a policy through an exchange because your employer does not offer coverage, and your spouse’s employer does not offer coverage to workers’ spouses, calculate your eligibility for premium tax credits and subsidies based on your combined income.
Medicare. If one spouse will not have the minimum of 40 quarters to qualify for coverage at age 65, recognize that Medicare coverage can become available based on the other spouse’s work history.
Financial planning: Social Security. If you are ready to file for spousal or survivor benefits and live in a state that recognizes your marriage, you may file and have the Social Security Administration process your request. Look for ways to optimize your benefits as a married couple. If you are ready to file for spousal or survivor benefits and live in a state that does not recognize your marriage, consider filing for benefits anyway. This may allow for retroactive benefits from the date of filing if and when the Social Security Administration begins to recognize marriages based on state of celebration.
Social Security spousal benefits. If you live in a state that recognizes your marriage, incorporate the potential payment of spousal and survivor benefits into your financial plan.
Financial planning: IRAs, taxes, and life insurance. If you have a regular IRA, consider updating your beneficiary to your spouse, if you have not already done so. If you wish to contribute to a regular IRA, determine whether you can make deductible contributions based on the combined income and workplace retirement plan availability of both spouses.
If you have a Roth IRA, consider updating your beneficiary to your spouse, if you have not already done so. If you wish to contribute to a Roth IRA, determine whether you can make contributions based on the combined income of both spouses.
If you file a joint tax return, consider contributing to a spousal RA. If neither spouse has a retirement plan at work, contributions will be tax deductible.
Estate and gift planning. When creating an estate plan, consider that same-sex couples married in a state of celebration (and both spouses are U.S. citizens) can now use the unlimited estate tax marital deduction to pass assets to a surviving spouse without incurring federal estate taxes. When considering making gifts, recognize that gifts and property can be transferred to each other without paying federal income or gift taxes.
Same-sex married couples will now also qualify for gift-splitting, meaning each spouse is treated as giving half the property gifted by the other.
Tax planning. Same-sex couples married in a state of celebration can/must now file federal tax returns using the “married filing jointly” or “married filing separately” options, and should speak with a tax advisor as they may be able to amend tax returns for some prior years.
Life insurance. Same-sex married couples may wish to revisit their life insurance needs. While estate planning needs may now be de-emphasized, life insurance can be used to mitigate the financial risk of lost earnings, fund a spouse’s retirement, or pay for the education of a child.