Tuesday, June 17, 2014

IRS Issues Guidance on Windsor Decision for Qualified Retirement Plans

On April 4, 2014, the IRS issued Notice 2014-19 which provides additional guidance on how qualified retirement plans should treat the marriages of same-sex couples following the June 26, 2013 Supreme Court’s ruling in United States v. Windsor. The Windsor decision invalidated Section 3 of the 1996 Defense of Marriage Act (DOMA) that barred same-sex couples from being treated as married under federal law. Subsequent to the Windsor decision, the IRS issued Revenue Ruling 2013-17 which stated that a couple would be considered married for federal tax purposes if their marriage certificate was issued by a jurisdiction having the legal authority to sanction marriages.
Moreover, once married, the IRS would consider the couple to be married, even if domiciled in a state that does not recognize same-sex marriages. Notice 2014-19 provides guidance on how to comply with the provisions of the Revenue Ruling. Specifically, the Notice provides guidance on the following:

  • Plan operations must reflect the Windsor decision as of June 26, 2013. This means plans are not required to recognize same-sex marriages for dates prior to then.
  • Plans can choose to comply with the Windsor decision as of any date prior to June 26, 2013 and can choose the purposes for which same-sex marriages are recognized for periods prior to that date. The Notice notes that early recognition may create implementation challenges.
  • For dates prior to September 16, 2013 (the effective date of Rev. Rul. 2013-17), qualified plans are not required to have determined whether same-sex couples are married by reference to the state law under which the marriage was performed. This means that plans will not be penalized for having determined marital status based on a participant’s domicile state before September 16, 2013.
  • Plans with terms that are inconsistent with the Windsor decision must be amended by the later of December 31, 2014 or the applicable date under the IRS’ general amendment guidance for qualified retirement plans. An amendment is not required if a plan’s terms are not inconsistent with the Windsor decision.
This guidance provided by the IRS will allow plan sponsors to determine the effect of the Windsor decision on the written terms of their plans and provides plan sponsors some flexibility in determining how to bring their plan into compliance.

If you have any questions about DOMA's impact on your organization’s retirement plan or would like to speak with an advisor about reviewing or establishing a plan, please contact us at (800) 388-1963 or via e-mail at hbs@hanys.org.