Navigating Health Savings Accounts (HSAs) and high-deductible health plans (HDHPs) is complicated enough, but after the Supreme Court ruling on June 26, 2015 recognized same-sex marriages, employers and employees found the rules remained complex.
The SCOTUS ruling, Obergefell v. Hodges, was a landmark decision for same-sex couples and their families, and also for the HR and financial professionals who work with them to provide information and resources on HDHPs and HSAs.
To help you learn more about HSAs and how the 2015 ruling affects them, here are some important FAQs to start your research:
#1: How did the Supreme Court’s 2015 ruling that all states must allow same-sex marriages impact HSAs?
The Supreme Court’s 2015 ruling in Obergefell v. Hodges allowing for same-sex marriages in all 50 states will impact HSAs for same-sex couples that legally marry in a state that previously forbid marriage for same-sex couples. Prior to the ruling, only same-sex couples that were legally married and recognized by the state law as “spouse” could take advantage of the special rules available to “spouses” under HSA law. Domestic partners or same-sex civil unions were not granted the same status as “spouses” under HSA law. Now all states must allow for same-sex marriages and treatment as spouses under HSA law for married same-sex couples.
Same-sex couples will have to be legally married to gain the benefit of “spouse” status under HSA law. From a health benefits perspective, legal marriage may become financially important to same-sex domestic partners if employers stop offering health insurance benefits to domestic partners. Some employers will likely drop benefits for domestic partners now that same-sex marriage is allowed.
#2: Is a domestic partnership or civil union the same as marriage?
No. The IRS states that for federal tax purposes the term “spouse” does not include “registered domestic partnerships, civil unions, or other similar formal relationships recognized under state law that are not denominated as a marriage under that state’s law…” This is true for same-sex and opposite-sex relationships. “Spouse” is the key word for HSA laws but “marriage” is generally the state classification that results in couples becoming “spouses.”
#3: Can an HSA owner use an HSA to pay the medical expenses for a same-sex spouse?
#4: Can HSA owners use HSA funds to pay medical expenses of domestic partners?
No. HSA owners can only use their HSAs to pay for the medical expenses of their spouses or their dependents. If a domestic partner meets the IRS requirements as a dependent (IRS Code Sec. 152), then the HSA owner can use his or her HSA for a domestic partner’s medical expenses. Meeting the definition of a “dependent” is difficult for nonchildren. If the HSA owner’s state recognizes same-sex marriages with the result being that the domestic partners are considered “spouses” (married), rather than domestic partners (or are spouses in addition to being domestic partners), then the HSA owner can use an HSA to pay for qualified medical expenses of a spouse.
#5: Can an HSA owner contribute the family HSA limit if the only other person on the family HDHP is a domestic partner or same-sex spouse?
Yes, in order to contribute the family HSA limit ($6,750 for 2016), an HSA owner must be covered by a family HDHP (covers the HSA owner and at least one other person). If that other person is a domestic partner, then the HSA owner has a family HDHP and can contribute the family limit if otherwise eligible for an HSA.
The rule is pretty straightforward in this area and to get the family contribution limit you simply need to be covered under a family HDHP, meaning the HSA owner and at least one other person be on the plan. That other person could be a spouse (same-sex or not), domestic partner (same-sex or not), child, or potentially someone else allowed on a family HDHP. The difference between same-sex domestic partners and same-sex married couples is significant for contributions. See the following question for more information and for distributions.
#6: Does the rule requiring married couples to coordinate their maximum family HSA contribution apply to domestic partners and same-sex spouses?
One potential downside for same-sex couples is that the Supreme Court’s ruling striking down the Defense of Marriage Act and the subsequent ruling in 2015 allowing for same-sex marriages in all the states is that it partially closed a loophole that allowed for domestic partners to make larger HSA contributions. HSA law caps spouses’ combined HSA contributions to the family limit ($6,750 for 2016) if one or both spouses had family HDHP coverage. Same-sex couples avoided that cap when they were not considered spouses and could each potentially contribute the maximum limit if they were covered under a family HDHP (i.e., they could each contribute $6,750 for 2016).
Spouses are subject to a couple of special rules in this regard: 1) if either spouse has family HDHP coverage, both spouses are deemed to have family HDHP coverage, and 2) combined the spouses cannot exceed the family HDHP limit.
Whether the loophole is still available to same-sex couples depends on whether or not the couple is legally married under state law.