The IRS has published Notice 2014-19 and related FAQs regarding the application of the Supreme Court’s decision in United States v. Windsor and Rev. Ruling 2013-17 to qualified retirement plans. All retirement plans should be reviewed for operational compliance with the guidance and to determine if amendments are needed. In this advisory we summarize the key components of this guidance, and the steps that retirement plan sponsors must take to ensure compliance.1
The key guidance in Notice 2014-19 is as follows:
- Recognize same-sex spouses as of June 26, 2013. Following the repeal of Section 3 of DOMA in Windsor, the same qualified plan retirement rules apply to opposite and same-sex spouses, effective June 26, 2013. So, for example, same-sex married participants are subject to the same spousal consent rules (QJSA/QPSA/beneficiary designations) that apply to opposite-sex spouses and additional required minimum distribution alternatives are available to spouse beneficiaries.
- Limited reliance on state of residence allowed. Prior to Sept. 16, 2013, a plan could rely on the state of residence to determine the validity of a same-sex marriage, but not after that date. This is because the IRS did not confirm that the state of celebration, rather than the state of residence, controls until it published Rev. Ruling 2013-17 with that effective date.
- No mandatory retroactivity. Qualified plans are not required to recognize same-sex spouses before June 26, 2013, but must recognize same-sex spouses for all purposes as of that date. However, although the IRS does not require that Windsor be applied retroactively, plans may still face such claims from participants.
- Optional retroactivity. Qualified plans may choose to implement an earlier effective date than June 26, 2013, for some or all purposes. The IRS cautioned that this may cause unintended consequences and create administrative difficulties (although correction procedures are available if retroactive application results in failure to operate according to the amended plan). This will require a plan amendment specifying the effective date and the rules to which the amendment applies.
- Plan amendment may be required. Whether a plan must be amended depends on its terms:
- If the plan defines spouse in a manner that is inconsistent with Windsor, Rev. Ruling 2013-17, and Notice 2014-19 (e.g. it uses a DOMA definition), it must be amended.
- If the plan’s definition of spouse is not inconsistent with Windsor, Rev. Ruling 2013-17 and Notice 2014-19 (e.g., the plan uses the generic term “spouse,” or “legally married spouse” or “spouse under federal law” without any distinction between same- and opposite-sex spouses) no amendment is required. However, operationally the plan must have recognized same-sex spouses as of June 26, 2013. In addition, the IRS suggests that a clarifying amendment may be useful for plan administration.
- Deadline for plan amendment. Generally, Dec. 31, 2014.
Plan sponsors should review the definition of “spouse” in their qualified plans (and other plans, such as 403(b) plans, and health and welfare plans), and prepare plan amendments where necessary. In addition, the qualified plan’s practice should be reviewed to ensure that same-sex spouses have been treated the same as opposite-sex spouses since June 26, 2013. If not, appropriate corrective action must be taken.
Finally, in Washington state, plan sponsors should introduce procedures to ensure that they are aware of any same-sex registered domestic partnerships that will be automatically converted into marriage as of June 30, 2014. These new spouses will be entitled to all spousal benefits under an employer’s plans.