On April 4, 2014, the Treasury Department and the Internal Revenue Service (the "IRS") released long-awaited guidance on how qualified retirement plans (such as defined benefit pension plans and 401(k) plans) should apply the U.S. Supreme Court's decision in United States v. Windsor. As discussed in our prior client alerts, the Court held in Windsor that Section 3 of the 1996 Defense of Marriage Act ("DOMA"), which barred married same-sex couples from being treated as married under federal law, was unconstitutional.
Fortunately, the new guidance does not require retirement plans to apply the Windsor decision retroactively prior to June 26, 2013, which was the date of the Windsor decision. Notice 2014-19 (the "Notice") provides that a retirement plan will not be treated as failing to meet the tax-qualification requirements of the Internal Revenue Code of 1986, as amended, (the "Code") merely because the retirement plan did not recognize the same-sex spouse of a participant as such participant's spouse before June 26, 2013.
According to the Notice, a retirement plan must apply the Windsor decision prospectively beginning June 26, 2013. However, a plan will not lose its tax-qualified status due to an amendment to reflect the outcome of the Court's decision as of a date prior to June 26, 2013, if such amendment complies with the Code's tax-qualification requirements. In addition, if a retirement plan, prior to September 16, 2013, failed to apply the "state of celebration" rule that was set forth in Revenue Ruling 2013-17, requiring plans to recognize a legally-married same-sex spouse of a participant regardless of the jurisdiction in which he or she resides, the retirement plan will not lose its tax-qualified status.
Most retirement plans will need to amend their terms if the terms defined a marital relationship by reference to DOMA or were otherwise inconsistent with the Windsor ruling and current IRS guidance (e.g., a retirement plan that provides that a spouse must be a person of the opposite sex). While there are exceptions, most retirement plans will need to be amended by December 31, 2014.
The IRS also issued a set of FAQs, which are available here.