IRS and DOL Recognize All Same-Sex Marriages

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The Internal Revenue Service (“IRS”) and Department of Labor (“DOL”) recently issued highly anticipated  guidance regarding the impact of United States v. Windsor , 133 S. Ct. 2675 (2013) – in which the United States  Supreme Court declared Section 3 of the Defense of Marriage Act of 1996 (“DOMA”) unconstitutional. In an  earlier  Alert , we discussed the impact of the  Windsor  decision on New York employers and benefit plan sponsors,  and the resultant legal uncertainties, including whether the IRS and DOL would recognize a marriage performed  in a state that recognizes same-sex marriages if the same-sex spouses reside in a state that does not recognize same- sex marriages.

Last month the IRS issued  Revenue Ruling 2013-17 , along with two sets of “Frequently Asked Questions,” one  addressing  same-sex married couples , and the other attending to  registered domestic partners and individuals in  civil unions . This Ruling states that the IRS will recognize same-sex marriages performed in a state that recognizes  same-sex marriages, without regard to the state law where the spouse is domiciled. Next, on September 18, 2013,  the DOL issued  Technical Release 2013-04 , wherein the DOL explains the term “spouse” as used in ERISA and  the Department of Labor’s regulations, “will be read to refer to any individuals who are lawfully married under  any state law, including individuals married to a person of the same sex who were legally married in a state that  recognizes such marriages, but who are domiciled in a state that does not recognize such marriages.” Finally, on  September 23, 2013, the IRS issued  Notice 2013-61 , explaining the application of the  Windsor decision to  employment taxes. In this Notice, the IRS provides two methods employers may use to correct or off-set FICA  tax overpayments attributable to income imputed to employees where the employee’s same-sex marriage was not  previously recognized under the Internal Revenue Code (the “Code”).

In light of this recent guidance, employers should immediately:

  • Stop imputing income to employees who enroll their same-sex spouses for coverage and permit employees to contribute toward same-sex spouse coverage under health and welfare plans on a pre-tax basis.
  • Require spousal consent and waivers from same-sex spouses, pay surviving spouse benefits to same-sex spouses, and ensure same-sex spouses receive any other spousal rights and protections provided with respect to pension plans under ERISA, the Code and the plan.
  • Review and revise welfare and retirement plan documents as applicable if “spouse” or “marriage” is defined to exclude same-sex spouses or marriages.
  • Review and update retirement plan distribution forms and administrative procedures including those applicable to QDROs, QJSA and QPSA benefits, minimum required distributions, Code limits, loans, hardships and rollovers.
  • Consider notifying employees of the  Windsor decision and IRS/DOL guidance.
  • Recommend to employees that they update participant records including beneficiary designation and marital status.
  • Consider filing for a tax refund for FICA taxes paid on same-sex employees’ imputed income.

Topics:  DOL, DOMA, IRS, Marriage, Same-Sex Marriage, SCOTUS, Tax Benefits, US v Windsor

Published In: Civil Rights Updates, Constitutional Law Updates, Family Law Updates, Labor & Employment Updates, Tax Updates

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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