On June 26, 2013, the Supreme Court ruled that Section 3 of the federal Defense of Marriage Act (DOMA) is unconstitutional. Section 3 provided definitions of "marriage" and "spouse" for federal law purposes, including the Internal Revenue Code and ERISA, both of which govern retirement plans. As a result, employers will need to look to the applicable state laws in determining the marital status of employees for purposes of its retirement plans and other employee benefit plans. Section 2 of DOMA, which was NOT affected by this ruling, allows states to refuse to recognize the validity of same-sex marriages licensed in other states.
It's not clear if this ruling will be effective retroactively or as of June 26, 2013 or in some combination. However, at a minimum, it appears the ruling is effective currently for employers with employees in any of the 13 states or the District of Columbia in which same-sex marriages are recognized. (See list below.) But, for employers without employees in any of these states or D.C., it is much less certain how and when this ruling will be effective. For example, it's not clear if an employer will be required to recognize an employee's same-sex marriage licensed in a state other than the state in which the employee resides. There are many unanswered questions which we expect will be addressed in upcoming guidance from the IRS, the Department of Labor (DOL), or other federal government agencies.
Which states currently recognize same-sex marriages?
| California | Minnesota |
| Connecticut | New Hampshire |
| Delaware | New York |
| Iowa | Rhode Island |
| Maine | Vermont |
| Maryland | Washington |
| Massachusetts | District of Columbia |
What will be affected in my retirement plan?
All plan provisions pertaining to a spouse must be expanded to include and provide equality for same-sex spouses, but subject to further guidance and clarification from the federal government. For example, the following areas would be affected:
- Beneficiary designations
- Consent to receive a loan or distribution, if applicable
- Distribution rights
- Rollover options
- Hardship withdrawals related to spouse's expenses
- Required minimum distributions upon participant's death
- Qualified Domestic Relations Orders upon divorce
- Ownership "attribution" rules
What should we do now?
1. Make a list of all of your employee benefit plans which provide spousal benefits or spousal coverage; e.g. qualified retirement plan, non-qualified deferred compensation plan, group health plan, group life insurance, fringe benefits, etc. These are the plans for which you should consider the need to take action in light of this new ruling - either immediately or pending further guidance.
2. If you have employees residing in any of the 13 states or the District of Columbia in which same-sex marriages are recognized, we recommend that you take immediate action to comply with the new ruling.
3. If you don't have employees residing in any of these 13 states or D.C., in general, we recommend that you WAIT for further guidance and clarification from the IRS and DOL.
4. In all cases, discuss your specific situation further with your consultants at Beasley & Company and with your ERISA attorney. We are ready to assist you in complying with this new ruling.
