IRS Guidance – Notice 2015-86 and Notice 2015-87

The Internal Revenue Service (IRS) recently released guidance on a number of issues affecting employee benefit plans.  Specifically, Notice 2015-86 provides guidance on the application of Obergefell v. Hodges to employee benefit plans.  Obergefell v. Hodges is the Supreme Court case that found the Fourteenth Amendment’s Due Process and Equal Protection Clauses require states to allow same-sex marriage and to recognize lawful same-sex marriages performed in other states.  Relating to health and welfare plans, the Notice that if a plan already offers benefits to same-sex spouses of participants, the tax treatment has been addressed in previous IRS Guidance.  Nevertheless, the plan document may require additional review to ensure the proper application of benefits.

Relating to a Cafeteria Plan, the Notice provides that if the employer did not offer same sex spouses coverage, the employer may permit enrollment of the same sex spouse in the Cafeteria Plan if the plan document permits a mid-year change.  As such, an employee would be permitted to revoke an existing election and submit a new election if the plan document permits change in coverage due to “significant improvement in coverage.”  Otherwise, the employer can amend the plan document to permit the changes.

Under Notice 2015-87, the IRS provides guidance on a number of issues including flex contributions, opt-out payment, employer payments for fringe benefits related to the McNamara-O’Hara Service Contract Act, definition of “hours of service” to determine full-time employee receiving short- or long-term disability.

For most employers, the most applicable sections of the Notice relate to the application of market reforms to Health Reimbursement Arrangements (“HRAs”).  The market reforms include, for example, the requirement to offer Minimum Essential Coverage (“MEC”) or ban annual limits.  If an HRA is not integrated with a group health plan, the HRA would not meet the market reform requirements.  As such, the notice explains when an HRA is and when it is not integrated with a group health plan and when it is or isn’t required to be integrated.  Finally, this section also discusses when an employer can buy an individual’s insurance policy and how flex credits may increase or decrease “affordability” calculations.

These Notices may be found: and

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