On April 4, 2014, the Internal Revenue Service (“IRS”) released Notice 2014-19
(the “Notice”), which provides additional guidance on how qualified retirement plans should treat same-sex marriages following the Supreme Court’s decision in United States v. Windsor
and the IRS holding in Revenue Ruling 2013-17.
Recognition of Same-Sex Marriages for Federal Tax Purposes
Prior to the Supreme Court’s decision in United States v. Windsor, Section 3 of the 1996 Defense of Marriage Act (“DOMA”) prohibited the recognition of same-sex spouses under federal law. Accordingly, same-sex spouses were not recognized for purposes of federal tax law with respect to qualified retirement plans. In Windsor, however, the Supreme Court struck down Section 3 of the 1996 Defense of Marriage Act (“DOMA”), holding that it was unconstitutional not to recognize same-sex marriages under federal law. Subsequent to the Windsor decision, the IRS released Revenue Ruling 2013-17 (the “Ruling”), which provided rules on the application of the Windsor decision for federal tax purposes. Specifically, the Ruling held that same-sex spouses are treated as married for all federal tax law purposes so long as the same-sex spouses are lawfully married under the laws of any domestic or foreign jurisdiction. Furthermore, the Ruling clarified that in the absence of Section 3 of DOMA, any retirement plan qualification rule that applies because a participant is married must be applied, prospectively as of September 16, 2013, with respect to a participant who is married to an individual of the same sex.
Plan Amendment Required for Qualified Plans with Provisions Inconsistent with Windsor and Revenue Ruling 2013-17
Under the Notice, qualified retirement plan documents and plan operations must recognize same-sex marriages as of the date Windsor was decided, June 26, 2013, in order to satisfy the Internal Revenue Code’s qualification requirements. If the terms of a retirement plan are inconsistent with the Windsor decision, the plan must be amended by the later of December 31, 2014 or the applicable date under the IRS general amendment guidance for qualified retirement plans, Revenue Procedure 2007-44, so that the plan terms are consistent with the Windsor decision. Thus, for private sector calendar-year plans, December 31, 2014 will be the deadline. Governmental plans may be amended by the end of the first regular legislative session of the body with authority to amend the plan that ends after December 31, 2014.
Other points made in the Notice are:
Individuals in registered domestic partnerships, civil unions or other formal arrangements recognized by state law are not treated as married for qualified plan purposes.
A qualified plan may be amended to recognize same-sex spouses for periods before June 26, 2013, but this amendment may trigger unintended consequences.
If a qualified plan defines the marital relationship in terms of Section 3 of DOMA or is otherwise inconsistent with the Windsor decision, it must be amended. A plan that does neither need not be amended (though it must comply with the Notice and the Ruling in operation).