Same-Sex Marriages and Retirement Plan Administration

As a lot of you are aware, in 2013, the United States Supreme Court, in United States v. Windsor, handed down a decision which declared Section 3 of the Defense of Marriage Act (DOMA) unconstitutional, thus creating an avenue whereby same-sex marriages would be recognized for Federal tax purposes. This recognition was firmly established by Revenue Ruling 2013-17.  Effective September 16, 2013, for federal law purposes, same-sex marriages must be recognized to the extent a couple is lawfully married in a jurisdiction that recognizes same-sex marriages.  Essentially, this means that even if the couple resides in a state which does not recognize same-sex marriages, for federal law purposes, including those laws governing qualified retirement plans (i.e., ERISA), the marriage is recognized.  

Qualified plans are governed by ERISA; as such, it is important for plan sponsors and plan administrators to be aware of the impact the Windsor decision has on the administration of their plan.  For example, the definition of spouse, and the recognition of same-sex marriages, impacts survivor benefits, qualified domestic relations orders, hardship withdrawals and rollovers among others.  Further, it is important to note that this new definition of spouse also changes the attribution rules associated with business ownership, which is important for the determination of highly compensated employees and controlled group situations.

Based on the above, the Internal Revenue Service (IRS) recently released guidance through IRS Notice 2014-19 outlining how retirement plans have to recognize same-sex spouses.  The notice and the accompanying frequently asked questions generally provide for the following:

  • Participants (and their spouses) who are in same-sex marriages generally must be treated as married for all purposes under a retirement plan as of June 26, 2013.  In certain circumstances, and with a proper amendment, a sponsor may choose a date prior to June 26, 2013, or may wait until September 16, 2013 to recognize the marriage.
  • As long as the plan is properly administered, if the plan defines “spouse” in a manner consistent with the Windsor decision, or does not define the term at all, then the plan may not need to be amended. However, if the plan terms are inconsistent with the guidance issued by the IRS or the decision, then the plan must be amended by the later of the plan’s remedial amendment period, or December 31, 2014. 

This recent guidance is likely to impact a significant number of qualified retirement plan documents and their administration.  Please contact your Schneider Downs representative if you would like to discuss how to make sure your plan is in compliance.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2019 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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