Retirement plans must recognize the rights of an employee’s same-sex spouse as of the U.S. Supreme Court’s ruling of June 26, 2013, and are permitted to do so prior to that date, under IRS Notice 2014-19. The IRS’s April 4 guidance includes information on the deadline for plan sponsors to amend their plans. The IRS also separately issued a frequently asked questions (FAQ) document that includes related information and a discussion of specific concerns for 403(b) and multiemployer plans.
The guidance applies to tax-qualified retirement plans such as defined benefit (DB) pension plans and 401(k) plans that include survivor benefits, spousal consent, minimum required distributions, qualified domestic relations orders (QDROs), and other spousal rights and features.
The IRS’s newly released Notice 2014-19 for tax-qualified retirement plans provides the following:
• Plans must be operationally compliant as of June 26, 2013, and the IRS will not raise qualification issues for plans that fail to treat same-sex spouses as spouses before then. The IRS also will treat a plan as qualified if, from June 26, 2013, through September 15, 2013, the plan treated a same-sex spouse as a spouse only if the participant lived in a state that recognized same-sex marriages (i.e., under the “state of domicile” rule).
• Plans are permitted to recognize same-sex marriages retroactively to a date before June 26, 2013, and may apply the recognition for limited purposes, e.g., for qualified joint and survivor annuity (QJSA) and qualified preretirement survivor annuity (QPSA) requirements. Doing so, however, will require that the plan amendment complies with the tax code’s qualification requirements.
• Plan documents will have to be amended if current language defines “spouse” as a person of the opposite sex or if recognition of same-sex spouses will be applied prior to June 26, 2013.
• Plans must be amended, in general, by December 31, 2014, for calendar-year plans (or, if later, the tax filing deadline for the year the change is effective). Special deadlines apply to governmental plans and single-employer defined benefit plans that are restricted from increasing benefits because of funding-based limits (under tax code section 436[c]) that choose to recognize same-sex spouses before June 26, 2013.
The IRS’s related FAQ discusses: beneficiary designations for profit-sharing or stock bonus plans if a participant dies on or after June 26, 2013; using the Employee Plans Compliance Resolution System (EPCRS) to apply the same-sex marriage definition retroactively; amending the plan for additional rights; compliance by, and amendment deadlines for, 403(b) plans; and multiemployer plans in “endangered” or “critical” status (i.e., subject to the additional funding rules under tax code section 432).
For additional information about the IRS’s guidance and for assistance with plan amendments, please contact your Milliman consultant.