Last week, the Internal Revenue Service issued Notice 2014-19, which sets forth the rules for recognition of same-sex spouses in retirement plan administration, as required under the U.S. Supreme Court's decision in U.S. vs. Windsor, which struck down Section 3 of the Defense of Marriage Act.

Most significantly, the guidance does not require plan sponsors to retroactively apply same-sex spousal recognition standards prior to June 26, 2013 (the date of the Windsor decision), but does allow for optional retroactive application of such standards prior to June 26, 2013.

Notice 2014-19 requires qualified retirement plans to recognize the same-sex spouse of a participant as of June 26, 2013, for purposes of:

  • Providing survivor benefits
  • Obtaining spousal consent
  • Making required minimum distributions
  • Accepting qualified domestic relations orders
  • Issuing hardship withdrawals
  • Carrying out other retirement plan administrative functions

Notice 2014-19 also confirms that retirement plan administrators must use the “state of commitment” standard in determining same-sex spouses as of Sept. 16, 2013. Qualified retirement plans that choose not to recognize same-sex spouses before June 26, 2013 will not be subject to plan disqualification or face penalties as a result of this decision.
Qualified retirement plans whose terms are inconsistent with U.S. v. Windsor and the state of commitment standard must be amended to comply with the ruling and standard. Generally speaking, non-governmental single employer plans have until Dec. 31 to adopt an amendment.

In the case of governmental plans, an amendment must be adopted no later than the close of the first regular legislative session of the legislative body with amendment authority that ends after Dec. 31. A required plan amendment can be adopted regardless of whether the plan would otherwise be subject to limitations set forth under Section 436 of the Internal Revenue Code (which deals with funding-based limits on plan benefits).

Attorneys in Ballard Spahr’s Employee Benefits and Executive Compensation Group regularly advise employers on providing benefits to same-sex couples and on all aspects of qualified retirement plan compliance. If you have questions about the ruling or its implications, please contact Brian M. Pinheiro at (215) 864-8511 or pinheiro@ballardspahr.com, Diane A. Thompson at (424) 204-4334 or thompsonda@ballardspahr.com, or Jonathan M. Calpas at (215) 864-8385 or calpasj@ballardspahr.com.

The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

 

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