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Department of Employee Trust Funds
Revised February 21, 2014

Federal Tax Compliance for Same-Sex Marriages
Information for Members

As a result of the U.S. Supreme Court ruling on the federal Defense of Marriage Act (DOMA), the Internal Revenue Service (IRS) issued Revenue Ruling 2013-17, effective September 16, 2013, related to same-sex marriages. Federal law requires the Department of Employee Trust Funds (ETF) to remain in compliance with IRS regulations when administering benefit programs.

The Revenue Ruling affects administration of benefits only when that administration is governed by federal tax law. Wisconsin law does not recognize same-sex marriages; even if such marriages are legal in the jurisdiction the marriage was performed.

General outcomes of the Revenue Ruling:

  • No enrollment opportunity is created for insurance-related programs.
  • Employers should not request a marriage certificate for proof of same-sex marriage.
  • Members who qualify must file an Affidavit of Domestic Partnership form (ET-2371) to get health insurance for a same-sex spouse.
  • Imputed income rules are affected. There are differences between state and federal imputed income.

Benefit programs administered by ETF are established by Chapter 40 of Wisconsin Statutes. A same-sex marriage is not considered the equivalent of a Chapter 40 domestic partnership in Wisconsin. Recognition of domestic partnerships for Chapter 40 benefit purposes has specific statutory requirements.

The following are frequently asked questions and answers regarding the effect of the Revenue Ruling on the benefit programs administered by ETF.

For more information, contact your employer if you are an active employee. If you are a retired member, contact ETF toll free at 877-533-5020 or locally at 608-266-3285.

General Questions

1. I am in a Chapter 40 Domestic Partnership with a same-sex partner, but am not married. Does federal recognition of same-sex marriage have any effect on me?

The federal recognition of same-sex marriage has no impact on Chapter 40 domestic partnerships. Chapter 40 domestic partnerships are statutorily defined by Wisconsin.

2. I was legally married to my same-sex spouse before coming to Wisconsin. Is my same-sex spouse automatically recognized for purposes of Chapter 40 benefits? If not, will my same-sex spouse automatically be considered my domestic partner?

Your same-sex spouse is not considered a legal spouse in Wisconsin. Your same- sex spouse is not automatically considered a domestic partner in Wisconsin. You can obtain coverage as a domestic partner if you meet the statutory requirements for a domestic partnership in Chapter 40 of Wisconsin laws and file an Affidavit of Domestic Partnership form (ET-2371) with ETF.


Health Insurance

3) How can I cover my same-sex spouse on my health insurance?

Under Wisconsin law, a Chapter 40 domestic partner can be covered under a member’s state or local group health insurance. Individuals in a same-sex marriage that satisfy statutory requirements for a Chapter 40 domestic partnership may obtain coverage as a domestic partner.

4) How are my income taxes affected by the addition of my Chapter 40 domestic partner (who is also my same-sex spouse) and his/her eligible dependents to my group health insurance?

If your domestic partner is also your same-sex spouse, your employer must exclude the employer contributions from your gross income for federal tax purposes, which would result in no imputed income and no additional federal tax liability. However, there will still be imputed income for the purposes of Wisconsin income taxes. See a tax professional for more guidance.

5) What proof do I need to cover my domestic partner who is also my same-sex spouse (and to not have imputed income for that coverage)?

To establish a domestic partnership, you must submit an Affidavit of Domestic Partnership form (ET-2371) to ETF.

6) What actions can I take to prevent imputed income if I have a same-sex marriage with my domestic partner?

If you are an active employee, you should contact your employer. If you are retired, please contact ETF.

7) Can I cover the children of my domestic partner who is my same-sex spouse?

You may add your domestic partner and his or her eligible dependents. For more detailed instructions on establishing a domestic partner and making health insurance coverage changes your contact employer. Retired members should contact ETF.

8) Will I have imputed income if I have a domestic partner who is also my same-sex spouse, I am retired, and I pay my own health insurance premiums?

No.

9) What if I use accumulated sick leave conversion credits (retired state employees only) for health insurance coverage of my Chapter 40 domestic partner who is also my same-sex spouse?

There is no income imputed for federal tax purposes. For Wisconsin tax purposes, the fair market value of the group health insurance benefits provided to the partner and partner’s eligible dependents are included in your gross income.

10) What if my former employer is a local government entity that is paying all or a portion of my health insurance premium that covers my domestic partner who is also my same-sex spouse?

The local government employer will determine and manage any imputed income amounts for Wisconsin tax purposes.


Wisconsin Retirement System (WRS)

11) Can I name my same-sex spouse as my beneficiary?

Yes, WRS death benefits are paid according to the most recent Beneficiary Designation form received prior to your death. If you have never filed a Beneficiary Designation form, your death benefits will be paid according to the Chapter 40 statutory standard sequence. The Beneficiary Designation form (ET-2320 or ET-2321) is for WRS benefits. The Wisconsin Deferred Compensation program Beneficiary Designation form is separate from the WRS beneficiary designation.

12) If I am in a same-sex marriage do I need to fill out a beneficiary designation to provide death benefits for my spouse?

“Surviving Spouse” in the state “standard sequence” is a matter of Wisconsin law, and therefore is not effective in relation to same-sex marriages. Without a beneficiary designation on file with ETF, any benefits payable would go to survivors in the other categories.

Members in same-sex marriages are strongly encouraged to consider filing a Beneficiary Designation with ETF and keep the form current. The Wisconsin Deferred Compensation program beneficiary designation form is separate from the WRS beneficiary designation. If you qualify under the Chapter 40 definition of domestic partnership, submit an Affidavit of Domestic Partnership form (ET-2371).

13) If I die after my WRS annuity begins, will my same-sex spouse receive my annuity?

Once your annuity begins, any death benefits payable are based on the annuity option you selected when you applied for retirement or §40.63 disability retirement. Detailed information about retirement annuity options is available in the Choosing an Annuity Option brochure (ET-4117). For more detail on §40.63 disability retirement see the Disability Payment Options on the Disability Benefits webpage.

14) When applying for a retirement or § 40.63 disability retirement benefit is my same-sex spouse legally presumed to be my named survivor?

Under federal tax law, if you have been married for at least one year prior to your annuity effective date, your same-sex spouse is legally presumed to be your named survivor when you apply for retirement. Unlike an ETF beneficiary designation form (which can be updated as often as you wish), you can never change your named survivor regardless of changes in your personal situation.

15) Does my same-sex spouse have to sign my retirement application when I retire?

Federal tax law creates a legal presumption that for marriages, the named survivor is the spouse. Same-sex spouses are now included.

If your marriage has been in effect for at least one full year immediately preceding the date that your WRS annuity begins, you must either select a joint and survivor annuity option with your same-sex spouse as your named survivor or your spouse must sign your application consenting to an alternate option.

16) If I die while I am an active employee, will my same-sex spouse receive any death benefits that are payable?

Eligibility for death benefits under the WRS is established by Wisconsin law, which does not recognize same-sex marriages. Members in same-sex marriages are strongly encouraged to consider filing a Beneficiary Designation form with ETF and keep the form current. The WDC beneficiary designation form is separate from the WRS beneficiary designation. If you qualify under the Chapter 40 definition of domestic partnership, submit an Affidavit of Domestic Partnership form (ET-2371).

17) Can my surviving same-sex spouse roll over my WRS death benefits into another retirement plan or account, such as to an Individual Retirement Account (IRA) that has been set up exclusively for receiving the distribution?

A spousal beneficiary is eligible to roll over lump sum WRS death benefits into his or her own (non-WRS) retirement account. Rollover options include traditional and Roth IRAs, Sec. 403(b) tax deferred plans, and Sec. 457 plans (except WRS). However, there are tax consequences under Wisconsin law. See the Same Sex Marriage FAQ at the Wisconsin Department of Revenue website. For additional information, consult your tax advisor.

Wisconsin Deferred Compensation Program (WDC)

For more information regarding the WDC, call 1-877-457-9377.

18) Can my surviving same-sex beneficiary roll over my WDC account into another retirement plan or account, such as to an IRA that has been set up exclusively for receiving the distribution?

Yes. Same-sex spouse beneficiaries will qualify for the more favorable plan and IRA required minimum distribution, and rollover rules that apply to surviving spouses. The IRS website shows where retirement savings may be transferred. However, these changes are only applicable to federal taxes and are not applicable for Wisconsin tax purposes. See the Same Sex Marriage FAQ at the Wisconsin Department of Revenue website. For additional information, consult your tax advisor.

19) If my same-sex marriage ends, can my WDC account be divided by a Domestic Relations Order (DRO) and a portion of my account be awarded to my former same-sex spouse?

Yes. To divide a WDC account with a DRO, use the Order to Divide Wisconsin Deferred Compensation Program Account (ET-2367) form.


Life Insurance

20) Can I purchase life insurance for my same-sex spouse through the Wisconsin Public Employers Group Life Insurance Program?

Under Wisconsin law, a Chapter 40 domestic partner can be covered under a member’s insurance. If your same-sex spouse is also your domestic partner, you may obtain coverage as a domestic partner.


Employee Reimbursement Account Program (ERA)

For more information regarding the Employee Reimbursement Account Program, contact your employer.

21) Can I use the ERA program for expenses of my same-sex spouse and/or our dependent children?

Yes, the ERA program is governed by federal law and is authorized under Section 125 of the Internal Revenue Code. However, there are tax consequences under Wisconsin law. See the Same Sex Marriage FAQ at the Wisconsin Department of Revenue website. For additional information, consult your tax advisor.

22) Do the federal tax law changes apply retroactively to the ERA Program?

The changes may apply to past situations. The IRS indicated in the ruling that it is still working on guidance regarding the retroactivity.


Optional Plans

For more information regarding optional plans, contact your employer.

23) Can I cover my same-sex spouse on the optional plans (vision, dental, excess medical, etc.)?

Under Wisconsin law, a Chapter 40 domestic partner can be covered under a member’s insurance. If your same-sex spouse is your domestic partner, you can obtain coverage by filing an Affidavit of Domestic Partnership form (ET-2371) with ETF.


24) How is my payroll deduction affected by the addition of my domestic partner (who is also my same-sex spouse) and his/her eligible dependents to my optional plan insurance?

Deductions for optional plans are not handled separately. All optional plans are deducted post tax if any of the member’s optional plans cover a person who, under state tax law, is not considered a tax dependent or spouse. Because Wisconsin law does not currently recognize same-sex marriage, payroll deductions for payment of optional plan premiums will be taken post tax.


Forms:
Affidavit of Domestic Partnership Form (ET-2371)
Beneficiary Designation (ET-2320)
Beneficiary Designation Alternate (ET-2321)
Order to Divide Wisconsin Deferred Compensation Program Account (ET-2367)
Wisconsin Deferred Compensation Program Beneficiary Designation Form

More Information from ETF:
Choosing an Annuity Option Brochure (ET-4117)
Domestic Partner Benefits
Divorce
ETF Chapter 40

IRS Links for More Information:

Revenue Ruling 2013-17
IRS Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law

 

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