Guidance issued on application of Windsor to retirement plans

Administrators of qualified retirement plans must recognize the same-sex spouses of legally married participants as of June 26, 2013, under guidance issued by the IRS but will not be required to amend their plans to retroactively recognize participants’ legal same-sex marriages before that date (Notice 2014-19).

The Supreme Court, in Windsor, 133 S. Ct. 2675 (U.S. 2013), held that Section 3 of the Defense of Marriage Act (DOMA), P.L. 104-199, is unconstitutional, and in August 2013 the IRS announced that same-sex couples who are legally married in jurisdictions that recognize their marriages will thus be treated as married for federal tax purposes, regardless of whether the jurisdiction they live in recognizes same-sex marriages (Rev. Rul. 2013-17).

In Notice 2014-19, which is organized as a series of questions and answers, the IRS says that as a result of the Windsor decision, “any retirement plan qualification rule that applies because a participant is married must be applied with respect to a participant who is married to an individual of the same sex.” For example, if a plan is subject to Sec. 401(a)(11), a plan participant in a same-sex marriage cannot waive a qualified joint and survivor annuity without obtaining his or her spouse’s consent.

The notice says that plans must treat same-sex marriages as valid as of June 26, 2013, the date of the Windsor decision, and will not be treated as failing to meet the requirements of Sec. 401(a) merely because they did not recognize the same-sex spouses of participants before that date. Between June 26 and Sept. 16, 2013 (the date of Rev. Rul. 2013-17), plans are allowed to recognize only same-sex marriages of participants who are domiciled in a state that recognizes same-sex marriage. Starting Sept. 16, 2013, they must recognize valid same-sex marriages regardless of whether the participant’s state of domicile recognizes the marriage.

Under the notice, qualified plans can be amended to reflect the outcome of Windsor for dates prior to June 26, 2013; however, the IRS warns that this may trigger requirements, such as the ownership attribution rules, that are hard to implement retroactively. There may also be other unintended consequences. If a plan is amended to retroactively reflect Windsor, it must specify the date as of which it will reflect Windsor.

The IRS will allow plans to be amended retroactively for specific purposes if they do not affect the plan’s qualified status. For example, a plan sponsor may amend the plan to reflect Windsor only with respect to the Sec. 401(a)(11) qualified joint and survivor annuity and qualified preretirement annuity requirements.

Some plans will have to be amended to reflect Windsor, depending on the terms of the plan. For example, any plan that defines a marital relationship by reference to Section 3 of DOMA or has terms that are otherwise inconsistent with Windsor or Rev. Rul. 2013-17 will have to be amended. Plan amendments must be made by the later of the plan’s otherwise applicable deadline under Rev. Proc. 2007-44, Section 5.05, or Dec. 31, 2014.

—Alistair M. Nevius (anevius@aicpa.org) is the JofA’s editor-in-chief, tax.