Client Alerts
April 08, 2014

IRS announces guidance on same sex marriage and retirement plans

Stites & Harbison Client Alert, April 8, 2014

On April 4, 2014, the IRS issued long awaited guidance on the application of the U.S. Supreme Court’s decision in United States v. Windsor on June 26, 2013, concerning same sex marriage to qualified retirement plans. In Windsor, the Court found that section 3 of the Defense of Marriage Act (“DOMA”) was unconstitutional. Section 3 had provided that for all federal law purposes the word “marriage” means only a legal union between one man and one woman as husband and wife and the word spouse refers only to a person of the opposite sex. Subsequent to the Windsor decision, the IRS issued guidance stating that for all federal tax purposes the term “spouse” includes an individual married to a person of the same sex if the individuals are lawfully married under state law. In addition, the IRS recognized same sex marriages that are validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.

Qualified retirement plans (including section 403(b) plans) must reflect the outcome of Windsor both in writing and in operation as of June 26, 2013. The definition of spouse impacts a qualified retirement plan in a number of ways, including, but not limited to, required minimum distributions, the joint and survivor annuity rules, and qualified domestic relations orders. Whether a qualified retirement plan must be amended to reflect the outcome of Windsor and IRS guidance depends on the terms of the plan. If the qualified plan’s terms are not inconsistent with Windsor and IRS guidance, then an amendment may not be necessary. An amendment is necessary for a plan to apply the outcome of Windsor prior to June 26, 2013.

The IRS deadline to adopt plan amendments conforming the terms of the plan to Windsor is generally December 31, 2014. A different deadline may apply for section 403(b) plans. Legal counsel should be consulted to determine whether any given plan should be amended.

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