Susan Jordan, one of my partners in Pittsburgh, provides the following guidance with respect to the IRS’ recent guidance on treatment of same-sex marriage:
In its decision in United States v. Windsor, handed down on June 26, 2013, the United States Supreme Court declared Section 3 of the Defense of Marriage Act to be unconstitutional. Section 3, which had defined marriage as a legal union between one man and one woman, was found to violate the principles of equal protection. Soon thereafter, both the IRS and the Department of Labor issued guidance making it clear that a same-sex marriage that is valid in the place of celebration (whether that be a state or a foreign jurisdiction having the legal authority to sanction marriage) will be recognized, regardless of the domicile of the parties. Both agencies further confirmed that the term marriage does not include registered domestic partnerships, civil unions or other formal relationships recognized under state law.
While the uniform definition of marriage and clarification that, for all federal purposes, the terms spouse, husband and wife will be defined on a gender-neutral basis, questions have remained with regard to the effects of the post-Windsor guidance on qualified retirement plans and other employee benefit programs. The IRS recently released much welcomed further guidance, in the form of Notice 2014-19 and a concurrently released set of Frequently Asked Questions, confirming that plans must recognize same-sex marriages as of June 26, 2013, the date of the Windsor decision, but are not required to extend retroactive recognition. In fact, if a plan sponsor wishes to apply the Windsor decision retroactively, the plan document must be amended accordingly.
Further, to the extent the terms of any plan document are inconsistent with the Windsor decision and the related guidance, the plan must be amended. For example, if a plan document defines “spouse” or “marriage” with reference to the Defense of Marriage Act or otherwise excludes same-sex couples, that language must be replaced. It is only those plans which contain objectionable language, however, that must be amended. The general deadline for adopting appropriate amendments is December 31, 2014.
Regardless of the language in the plan document, same-sex marriage must be recognized, in operation, as of June 26, 2013. Notice 2014-19 provides some additional leeway in this regard. With respect the period beginning June 26, 2013, and ending September 16, 2013, plans are protected if recognition of same-sex marriage was based upon whether the marriage is recognized in the state of domicile. The state of celebration rule, however, must be followed as of September 16, 2013.
In the wake of this most recent guidance, plan sponsors should take the following steps:
- Review all plan documents to determine whether any plan terms are inconsistent with the Windsor decision or the subsequent guidance and, if so, adopt appropriate amendments by the end of this year.
- Ensure that plan operations conform to current law, including any retroactive effect that may have been elected voluntarily.
- Encourage all plan participants to review their beneficiary designation forms and to update them when appropriate.