Defense of Marriage Act Struck Down – What it Means for Employers


The Supreme Court’s decision to strike down section 3 of the Defense of Marriage Act will have a major impact on the benefits employers provide to employees. Pending IRS guidance, employers should review benefit plans and amend as appropriate for this change in federal law.

Major employee benefits that are affected by the decision:

  • Tax treatment of spousal health coverage: Historically, if an employer has provided coverage for same-sex spouses, the value of that coverage has been treated as a taxable benefit under federal tax law. With the Supreme Court’s decision, spousal coverage is now a pre-tax benefit, whether or not the spouse is the same sex as the employee.
  • Spousal coverage under COBRA: Same-sex spouses are now eligible for COBRA continuation coverage.
  • Joint and survivor annuities: A tax-qualified pension plan must generally pay a married participant’s benefits in the form of a “qualified joint and survivor annuity,” unless the participant elects otherwise and the spouse consents.
  • Spousal consent for retirement plan payments to a non-spouse beneficiary: A married participant in a defined contribution plan (e.g., a 401(k) plan) may leave the balance remaining in his or her account at death to a non-spouse beneficiary only if the spouse consents in writing.
  • Other retirement plan actions requiring spousal consent: The consent of an employee’s same-sex spouse will now be required for certain plan loans and certain lump- sum distributions.
  • Retirement plan distribution alternatives: The following distribution alternatives will now be available to same-sex couples:
    • More liberal rules regarding required minimum distributions, including the option of a longer distribution period once required minimum distributions begin.
    • A spouse of a deceased employee may roll over a distribution attributable to the employee’s account following the same rules as if the spouse were the employee. Non-spousal rollover rules do not apply.
  • Qualified domestic relations order eligibility: A QDRO is a court order pursuant to a divorce that gives an employee’s former spouse the right to receive a share of the employee’s pension account. Such shares are taxable to the former spouse.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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