As has been widely addressed in the news, on June 26, 2013 the
Supreme Court ruled that the Defense of Marriage Act (DOMA) is
unconstitutional. The Court’s decision is
far reaching and has a significant impact on the operation of tax-qualified
retirement plans. We are writing to alert you of the issues resulting from the
DOMA stated that 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 who is a husband or wife. As DOMA has been determined to be
unconstitutional , tax-qualified retirement plans must now treat the
relationship of same-sex married couples as a marriage and each party to that marriage
as a spouse in order to maintain the
plans’ tax-qualified status.
As the states do not have uniform rules regarding same-sex
marriages, the Internal Revenue Service and Department of Labor will look to
applicable state law to determine the marital status of individuals. Currently, 12 states and the District of
Columbia issue same-sex marriage licenses.
The following are issues requiring future guidance from
The status of same-sex marriages where the
couple moves to a state that does not issue same-sex marriage licenses
The treatment of plan sponsors with employees in
more than one state
The effective date of the new ruling with
respect to tax-qualified retirement plans.
Plan amendment requirements that will address
the definition of a participant’s spouse.
There are several operational issues that impact a
participant’s spouse. Among the issues
that are impacted by this ruling are:
Survivor benefits for plans that provide a
qualified joint and survivor form of payment.
Waiver of death benefits that are automatically
provided to a participant’s spouse.
Rollover of death benefits by a participant’s
Hardship distributions used to pay for a
spouse’s medical, tuition, or funeral expenses.
The ability of a participant’s spouse to defer
the payment of death benefits.
Entitlement to benefits as the result of a
Qualified Domestic Relations Order (QDRO).
Spousal consents for loans and distributions.
In order to prepare for the new requirements brought about
by the Supreme Court decision, we suggest that plan sponsors develop a process
to gather same-sex marriage information (if not currently done).
Stay tuned for updates as future guidance is provided with
this far reaching Supreme Court decision.
For more solutions and insights to help better manage your
employees and business, check out Human Capitalizing at http://blog.cbiz.com or follow CBIZ Retirement
Plans on Twitter-@CBIZ_Retirement.
Article submitted by Bill Karbon, Director of Compliance for
CBIZ Retirement Plan Services.