IRS Issues Post-Windsor Guidance for Retirement Plans

The IRS, in Notice 2014-19 and related FAQs, says that retirement plans have to recognize same-gender spouses and spells out how. The notice and FAQs, which the IRS issued April 4, are a follow-up on Revenue Ruling (Rev. Rul.) 2013-17, which provided general guidance on the tax implications of the Supreme Court’s decision in U.S. V. Windsor (the DOMA case). Notice 2014-19 and the FAQs specifically focus on retirement plans. 

The notice and FAQs generally provide for the following:

• General Effective Date. Participants (and their spouses) who are in same-gender marriages generally must be treated as married for all purposes under a retirement plan as of June 26, 2013 (the date of the Windsor decision).

• Optional Effective Date. A sponsor of a retirement plan may elect to recognize only same-gender marriages of participants as of June 26, 2013 if they live in a state that recognizes same-gender marriages. For participants who live in a state that does not recognize same-gender marriages, a sponsor of the plan is permitted to recognize their marriages as of Sept. 16, 2013 (the date the IRS issued Rev. Rul. 2013-17). A plan amendment would be required to reflect the use of this optional effective date.

• Optional Retroactive Effective Date. A sponsor of a retirement plan may elect to recognize same-gender marriages as of a date that is before June 26, 2013 for some or all purposes under the plan (so long as all qualification requirements of the Code are satisfied). A plan amendment would be required to reflect the use of the optional retroactive effective date.

• Amendment of Plan Definitions. If the plan defines “spouse,” “legally married spouse,” “spouse under Federal law,” etc. in a manner consistent with Windsor (or does not define those terms), then the plan does not need to be amended (so long as the plan has been properly administered). However, if the plan’s definitions of these (or other) terms are not consistent with Windsor, then the plan must be amended.

• Timing of Plan Amendments for 403(b) plans. Any plan amendments adopted pursuant to Notice 2014-19 must be adopted by the deadline in Section 21 of Revenue Procedure 2013-22.

• Timing of Plan Amendments for “qualified” retirement plans (like 401(a) plans). In general, amendments to such plans are due by the later of the plan’s remedial amendment period, or Dec. 31, 2014. 

• Spousal Direct Rollovers from Non-ERISA 403(b) Plans. A non-ERISA 403(b) plan must permit an eligible same-gender spouse to make a direct rollover to another eligible employer retirement plan or IRA.

Although Notice 2014-19 and the FAQs provided much-needed guidance, they did not address governmental 457(b) plans or IRAs.  

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