Industry Groups Join Forces on Spouse Rule

December 11, 2013 ( – Retirement industry advocacy groups are urging the Treasury Department to ensure same-gender spouse rule changes will not apply retroactively for qualified retirement plans.

In all, 13 industry groups signed an open letter sent to J. Mark Iwry, a senior adviser for retirement and health policy at the Department of the Treasury. The letter is also addressed to George Bostick, benefits tax counsel for the Office of Tax Policy at the Treasury. 

In the letter, the organizations seek assurance that the Internal Revenue Service (IRS) will utilize its authority under Internal Revenue Code (IRC) Section 7805(b)(8) to limit retroactive application of Revenue Ruling 2013-17—which took effect September 16 and changed the IRS’s definition of spouse to include legally married, same-gender partners.

Revenue Ruling 2013-17 stems from the Supreme Court’s Windsor decision handed down this summer. That ruling, in part, struck down the Defense of Marriage Act (DOMA), which limited the federal government’s interpretation of “marriage” and “spouse” to apply only to heterosexual unions.

The organizations call on the Treasury and the IRS to issue further guidance, providing that the agencies will not disqualify a retirement plan as a result of the plan’s failure to administratively comply with the revenue ruling prior to its effective date.

Such guidance would be consistent with the guidance issued subsequent to the Supreme Court’s holding in Central Laborers Pension Fund v. Heinz, another case involving changes to retirement plan benefits, the letter argues.

As a result of the Heinz decision, the IRS issued Revenue Procedure 2005-23, which limited the retroactive application of the Heinz decision for plan qualification purposes.  

Similar guidance to supplement Revenue Ruling 2013-17 is critical to prevent significant administrative and liability issues, argues the letter.

For example, when it comes to qualified joint and survivor annuities (QJSA) or similar annuity arrangements, it is unclear whether and under what circumstances plans would be required to pay retirement benefits to the same-gender spouses of deceased participants should the ruling apply retroactively. In other words, if a same-gender married participant retired prior to Ruling 2013-17 and was treated as ineligible to elect a QJSA, must the plan now provide the participant with an opportunity to make that election?

The letter argues that similar ambiguities would arise under retroactive application in such areas as 401(k) death benefits, required minimum distributions, rollover distributions, hardship withdrawals, plan loans and nondiscrimination testing.

Signing organizations for the letter include the American Council of Life Insurers (ACLI), the ERISA [Employee Retirement Income Security Act] Industry Committee (ERIC), the ESOP [Employee Stock Ownership Plan] Association, Financial Service Institute Inc. (FSI), the Financial Services Roundtable (FSR), Insured Retirement Institute (IRI), Investment Company Institute (ICI), Plan Sponsor Council of America (PSCA), Securities Industry and Financial Markets Association (SIFMA), Small Business Council of America (SBCA), Society for Human Resources Management (SHRM), the SPARK Institute Inc. and the U.S. Chamber of Commerce.

The groups represent a wide range of plan sponsors, recordkeepers, administrators and advisers of defined contribution (DC) retirement plans.

A copy of the letter can be read here