The IRS has issued long-awaited guidance (Notice 2014–19) on the application of E.S. Windsor, SCt., 2013–2 ustc ¶50,400, to qualified retirement plans. The IRS reiterated that qualified retirement plan operations must reflect the outcome of Windsor and treat all same-sex couples, who were legally married in jurisdictions that recognize their marriages, the same as they treat opposite-sex couples. The guidance addresses when a retirement plan must be amended.
As you likely recall, the June 2013 Windsor ruling struck down Section 3 of the Defense of Marriage Act (DOMA), which had prohibited the federal government from recognizing same-sex marriages by defining marriage as being between “one man and one woman.” Following the Supreme Court’s decision, federal government began to recognize same-sex marriages that had been legally sanctioned in the states. The IRS in particular issued a revenue ruling that announces that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for all federal tax purposes. The IRS also determined that the terms “spouse,” “husband and wife,” “husband,” and “wife” include an individual married to a person of the same sex.
In its updated FAQs, however, the IRS reminded taxpayers that domestic partners are not spouses for purposes of applying the federal tax law requirements relating to qualified retirement plans, regardless of whether that person’s partner is of the opposite or same sex.
The IRS guidance reiterated that qualified retirement plan operations must reflect the outcome of Windsor as of June 26, 2013. A retirement plan will not fail to meet the requirements of Code Sec. 401(a) merely because it did not recognize the same-sex spouse of a participant as a spouse before June 26, 2013. Further, a qualified retirement plan will not lose its qualified status due to an amendment to reflect the outcome of Windsor for some or all purposes as of a date prior to June 26, 2013, if the amendment complies with applicable qualification requirements.
Whether a plan must be amended, the IRS explained, depends on the terms of the specific plan. If a plan’s terms define a marital relationship by reference to section 3 of DOMA or are otherwise inconsistent with Windsor, Rev. Rul. 2013–17 or Notice 2014–19, amendment would be required. Generally, the deadline for amendment is the later of the otherwise applicable deadline under Section 5.05 of Rev. Proc. 2007–44, or its successor, or December 31, 2014. If a plan’s terms are not inconsistent with the outcome of Windsor and the guidance in Rev. Rul. 2013–17 and Notice 2014–19, an amendment generally would not be required.
In other words, only plans that define spouse or marriage using a “one man, one woman” definition or by reference to the prior Section 3 of DOMA must be amended. Plans that do not include this definition and do not refer to Section 3 of DOMA do not need to be amended.
If you have any questions about retirement plans, please contact your Brown Smith Wallace Tax Advisor, or Jason Oesterlei, at 314.824.5295 or JOesterlei@bswllc.com.