Most important for retirement plan sponsors, this applies to the federal Internal Revenue Code (the Code) and the Employee Retirement Income Security Act (ERISA).
However, from the boots-on-the-ground perspective of a retirement plan sponsor, this decision presented several shades of gray as far as implementation. For example, how do you administer the beneficiary designation process for participants whose same-sex spouse is now a legal spouse under the plan? What if your state doesn’t recognize same-sex marriages, but an employee was married in a state that does? How do you handle civil unions?
Here’s what plan sponsors need to know to help to ensure they’re in compliance with the law now and going forward.
Who Is Covered
Let’s start with the basics, under the Windsor decision and subsequent guidance issued by the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL), for purposes of the Code and ERISA, all marriages considered valid by the state in which they were entered (the “state of celebration”) must be treated as valid under federal law, regardless of whether the couple resides in a state that permits or recognizes same-sex marriage.
That means if an employee was married in a state that allows same-sex marriages and the marriage is considered valid under that state’s laws, you must treat the union as a legal marriage for purposes of the Code and ERISA, just as you would for an opposite-sex marriage. It makes no difference whether or not same-sex marriage is legal in your own state.However, keep in mind that the law applies to marriages only. Civil unions and domestic partnerships aren’t covered by the court’s decision, so there’s no legal obligation to offer benefits in those cases, to the extent that these individuals are not considered legally married in the state in which the civil union was celebrated.
Paperwork: Time for a Company-Wide Do-Over
Obviously, your plan administrative forms may need to be revised to reflect that a same-sex spouse of a participant is now his or her spouse under the plan. While most plans themselves are required to be amended by December 31, 2014, it’s wise to begin revising plans and summary plan descriptions now, if revisions are necessary. (Be sure to double-check your specific compliance deadlines, as these may vary.)
Keep in mind that updating documents may require more than just adding a compliant definition of the word “spouse.” Rather, all references to “spouse” used in different contexts throughout all your plan materials may need to be modified to reflect the change in the law. Be sure to work with your legal counsel to ensure that appropriate amendments are made to your plan administrative forms, plan documents and summary plan descriptions.
In particular, a plan sponsor may need to update its qualified domestic relations order (QDRO) procedures; beneficiary designation forms (including waivers of joint and survivor annuity forms); and ensure defined benefit pension plan benefits for those with a same-sex spouse are administered in accordance with the requirements of section 401(a)(9).
In addition, if your plan already provides benefits to same-sex partners, review definitions to ensure the clear distinction between marriages, civil unions, and domestic partnerships under the plan.
Keep It Uniform
In order to ensure you have updated beneficiary information from every participant, you may want to consider asking every participant to update his or her beneficiary designation forms. This way, you can ensure everyone has the opportunity to name appropriate beneficiaries in accordance with the spousal joint and survivor annuity requirements.
If your plan calls for participants to provide a marriage certificate in conjunction with the beneficiary designation process, make sure you’re asking for participants to provide marriage certificates to substantiate marriage with any spouse (both an opposite sex spouse or a same-sex spouse).
Key takeaway for plan sponsors: The Code and ERISA require that same-sex spouses and opposite-spouses be treated as legal spouses under your retirement plan.
Amanda Layton is an attorney in the Employee Benefits and Executive Compensation Practice Group of Duane Morris LLP, Philadelphia.
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.Any opinions of the author(s) do not necessarily reflect the stance of Asset International or its affiliates.