DOMA and Your Retirement Plan

DOMA and Your Retirement Plan

On June 26, 2013, the U.S. Supreme Court in United States v. Windsor declared Section 3 of the Defense of Marriage Act or “DOMA” as being unconstitutional. The effect of this decision is to give employees in a legally recognized same-sex marriage the same legal status as employees in opposite-sex marriages.
On September 18, 2013, the DOL issued Technical Release 2013-04, which recognizes marriages to include a same-sex marriage that is legally recognized under any state law, even if the individuals are domiciled in a state that does not recognize same-sex marriages. In other words, according to this release, a legal marriage license dictates whether a couple is married, not where they live. Although the DOL guidance didn’t have a stated effective date, the IRS issued similar guidance (which applied a consistent approach), which had a prospectively applied effective date of September 16, 2013.

Both agencies indicated that they intend to issue further guidance on this subject, addressing specific provisions of ERISA, which was expected to address any retroactive application considerations. In fact, just recently, the IRS issued Notice 2014-19, requiring a plan amendment when the terms of the plan are inconsistent with the findings in the Windsor matter. The IRS also issued answers to frequently asked questions on applying the Windsor decision to qualified retirement plans, and the FAQs effectively set the requirement date for compliance as being June 26, 2013. Also, FAQ-3 indicated that if a plan was amended retroactively consistent with the Windsor decision and in accordance with the EPCRS program, that wouldn’t impact the Plan retaining its qualified status. That FAQ implies that retroactive application is option, but speaking to qualified ERISA legal counsel is advisable to see if more definitive guidance is issued.

Plans are well served to have controls in place to ensure that the spouses of employees, who are in legally recognized same-sex marriages, are given the same benefits that are available to employees’ opposite-sex spouses for legally recognized marriages. A few considerations include, but are not limited to:

  1. Having appropriate discussions with qualified ERISA legal counsel to determine that the Plan was properly amended, if required.
  2. Having controls in place to for obtaining written spousal consent for beneficiary changes.
  3. Having controls in place to properly address adequate provisions for hardship withdrawals, where applicable.
  4. Having appropriate controls to cover spousal rollovers to IRAs.
  5. Providing survivor annuity protection unless waived by the spouse, where applicable.

The impact of this Supreme Court decision in all likelihood is still ongoing, so keeping current on these developments will continue to be important.

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The information contained herein is not necessarily all-inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriately qualified professionals for your plan’s individual facts and circumstances.

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