Notice clarifies midyear amendment of certain retirement plans post-Windsor

BY SALLY P. SCHREIBER, J.D.

The IRS clarified that a qualified retirement plan will continue to be a qualified 401(k) or 401(m) safe-harbor plan if it adopts a midyear amendment to its plan to comply with the rules in Notice 2014-19 requiring qualified plans to conform to the Windsor decision (Notice 2014-37). A safe-harbor 401(k) or 401(m) plan is a plan that meets certain requirements that exempt it from the nondiscrimination rules, among them a restriction on amending the plan after the beginning of the plan year.

As a result of the Supreme Court’s decision in Windsor,  133 S. Ct. 2675 (U.S. 2013), invalidating Section 3 of the Defense of Marriage Act (DOMA), P.L. 104-199, same-sex couples who are legally married in jurisdictions that recognize their marriages are treated as married for all federal tax purposes. In Notice 2014-19, the IRS told administrators of qualified retirement plans that their plans must recognize the same-sex spouses of legally married participants as of June 26, 2013. (See here for a summary of those rules.)

Specifically, Q&A No. 8 of Notice 2014-19 states that the deadline to amend a plan to comply with Windsor (e.g., to eliminate any reference to marriage as defined in DOMA) is the later of (1) the otherwise applicable deadline under Section 5.05 of Rev. Proc. 2007-44, or its successor, or (2) Dec. 31, 2014. Section 5.05 of Rev. Proc. 2007-44 provides that, when there are changes to the plan qualification requirements that affect provisions of the written plan document, the adoption of an interim amendment generally is required by the later of the end of the plan year in which the change is first effective or the due date of the employer’s tax return for the tax year that includes the date the change is first effective.

Because such an amendment could violate the restriction on midyear amendments for safe-harbor 401(k) and 401(m) plans, the IRS clarified that such a plan will not fail to satisfy the requirements to be a 401(k) or 401(m) safe harbor plan merely because the plan sponsor adopts a midyear amendment pursuant to Q&A No. 8 of Notice 2014-19.

Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.

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