The Supreme Court recently handed down its decision that the Defense of Marriage Act (DOMA) is unconstitutional. Prior to this decision, the legal definition of marriage was confined to couples of the opposite sex.
Now that the Supreme Court has declared that the definition of marriage includes same-sex couples as well, many different opportunities have arisen for same-sex couples to reap the same benefits as traditional married couples, including with their HSAs.
How Does This Affect Health Care?
Although most of the changes this ruling brings about seem obvious to many, the relevant changes to health care are less so. However, some significant new benefits are now in effect for same-sex couples, especially pertaining to high-deductible health plans combined with an HSA.
Prior to this ruling, the definition of a spouse for the purpose of an HSA plan was strictly confined to opposite-sex couples. With an HSA, there are special allowances accorded to spouses under the laws governing health savings accounts. Some of these include:
- A spouse can claim the HSA as their own if the owner of the account dies.
- An HSA owner can use the HSA to pay the medical expenses of a spouse, tax-free.
- In the event of a divorce, the HSA account owner can transfer some of the funds into an HSA owned by the former spouse.
If the owner of the HSA dies and the remaining balance is transferred to the surviving spouse, this can change estate taxes charged.
What Has Changed?
Now that this ruling has been made, same-sex couples who are married in a state where their marriage is legal are now afforded the same rights as opposite-sex couples under HSA laws. As long as the marriage is legally recognized, these couples cannot be governed by separate HSA laws.
Prior to this, same-sex marriages were not considered valid, regardless of whether state law allowed them or not. Therefore, HSA owners could not use their account to pay the expenses of their spouses, nor could they claim the account in the case of death of the owner.
Does This Apply Nationwide?
No, these changes do not apply to same-sex marriages that are not performed in states where they are legal. The states that currently allow (and legally recognize) same-sex marriages are Minnesota, Connecticut, California, Maine, Massachusetts, Maryland, New Hampshire, Delaware, Iowa, New York, Rhode Island, Vermont and Washington. They are also legal in the District of Columbia.
If a same-sex couple was legally married in one of these states and later moves to a state where their marriage is not considered valid, the HSA rules for spouses still apply.
What About Domestic Partnerships or Civil Unions?
Unfortunately, at this time domestic partnerships or civil unions between same-sex couples are bound by the same regulations as any non-married couple, whether same-sex or not. This means that there is no special treatment for the distribution of HSA funds and no tax benefits.
Can Benefits Be Claimed Retroactively?
Although the Internal Revenue Service has stated that the changes became formalized in September 2013, the DOMA was deemed unconstitutional in early June. For this reason, married same-sex couples who were already married at that time can retroactively claim the tax benefits for their HSA.
Is There a Downside?
One of the only negative impacts to same-sex married couples is that under the new HSA regulations, one of the loopholes allowing each person to contribute the maximum amount to their HSA has closed. Now, instead of being allowed to contribute the maximum of $6,450 each, they are only allowed to contribute that amount total.
However, overall, this change to how HSAs are regulated is beneficial for same-sex couples who are married. Qualified medical expenses for the spouse can be paid out of the owner’s HSA, and the tax benefits for married couples are extremely helpful.
If you are now able to take advantage of these new HSA allowances for married same-sex couples but do not have an existing HSA, you can contact one of our Personal Advisors for quotes on a variety of HSA plans. Our services are free to you, and there is no obligation to purchase anything. Please contact us at 866-749-2039 for more information on available plans and pricing in your area.
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