If you’re anywhere near a retirement plan, you have probably received a ton of emails from law firms and 401(k) providers on the recent Supreme Court decision involving same-sex marriages.
With the caveat that I’m not an attorney, here’s my Cliff Notes version on the June 26, 2013, United States Supreme Court ruling in U.S. v. Windsor.
The Court held that that Section 3 of the Defense of Marriage Act (“DOMA”) is unconstitutional under the Due Process Clause of the Fifth Amendment. Section 3 had barred recognition of same-sex marriages for purposes of any federal law or regulation subject to federal law. This includes the Internal Revenue Code (“Code”) and ERISA.
It has the immediate effect of granting same-sex couples who are married under state law the same federal rights, protections, and responsibilities as are afforded to married opposite-sex couples under the Code and ERISA.
The Internal Revenue Service (IRS) issued guidance on September 16, 2013 that same-sex couples legally married in a jurisdiction with laws authorizing same-sex marriage will be treated as married for federal tax purposes, regardless of whether the couple resides in a state where same-sex marriage is recognized. The so-called "state of celebration". Further guidance is needed from the IRS as to whether it applies retroactively.
The Department of Labor (DOL) in recent guidance also recognized a “state of celebration”. For DOL purposes, a spouse will include all legally married same-sex spouses, even if the couple resides in a state that does not recognize such marriages. We can expect the DOL to issue future guidance addressing specific provisions of ERISA and its regulations.
So what should employers do now?
The Windsor decision can impact retirement plans in the following areas in which a “spouse” could be involved:
- Attribution Rules
- Hardship Distributions
- Death Benefits
- Qualified Joint and Survivor Annuity (QJSA) and Qualified Pre-Retirement Survivor Annuity (QPSA):
- Spousal Consent
- Qualified Domestic Relations Orders (QDROs)
- Required Minimum Distributions (RMDs)
Employers should consider reviewing their plan documents, internal procedures, and employee communication materials to determine if changes need to be made.And then wait for further IRS and DOL guidance.