Same-Sex Spouse Treatment Under Retirement Plans: New Guidance Requires Employer Action

Author: Tracy Morley, XpertHR Legal Editor

April 14, 2014

The Internal Revenue Service (IRS) issued Notice 2014-19 and related Frequently Asked Questions (FAQs) providing guidance on how qualified retirement plans should treat same-sex spouses following the Supreme Court's decision in United States v. Windsor. The guidance confirms that sponsors and administrators of qualified retirement plans must use the "state of celebration" standard when determining same-sex spouses, and requires employers to take action to ensure that plan documents and operations conform to requirements.

In Windsor, the Court struck down Section 3 of the Defense of Marriage Act (DOMA), which prohibited married same-sex couples from being treated as married under federal law. Following this ruling, the IRS issued Revenue Ruling 2013-17, which clarified that, effective September 16, 2013, married same-sex couples would be treated as married for all federal tax purposes (i.e., adopting gender-neutral definitions of the terms "spouse," "husband" and "wife") if the couple was lawfully married in a jurisdiction that recognizes same-sex marriage.

Notice 2014-19 requires qualified retirement plans to recognize the same-sex spouse of a participant as of June 26, 2013, the date of the Windsor ruling, and provides these participants with important rights with respect to:

  • Providing survivor benefits;
  • Spousal consent rules;
  • Required minimum distributions;
  • Hardship withdrawals; and
  • Qualified domestic relations orders.

A qualified retirement plan must be amended if the terms of the plan are inconsistent with Windsor or Revenue Ruling 2013-17. For example, if the plan defines "spouse" as an individual of the opposite sex by reference to Section 3 of DOMA or by reference to the law in a participant's state of residence (as opposed to the state of celebration), the plan must be amended.

Plan sponsors may, but are not required to, apply the outcome of Windsor prior to June 26, 2013. In this case a plan amendment is also required. Qualified retirement plans that choose not to recognize same-sex spouses prior to the Windsor decision will not lose qualified status as a result of this decision.

A plan amendment is not required if: (i) the terms of the plan are consistent with Windsor; and (ii) the sponsor does not recognize same-sex spouses prior to June 26, 2013.

If applicable, plan amendments must generally be adopted by the later of:

  • December 31, 2014; or
  • The applicable deadline under Revenue Procedure 2007-44, which generally requires that an interim amendment be adopted by the end of the plan year in which the amendment is effective.

Special deadlines apply to governmental and 403(b) plans.