Potential Impact of Defense of Marriage Act Decision on ERISA Plans

07/09/2013

On June 26, 2013 the U.S. Supreme Court, in a 5-4 decision, held that the federal Defense of Marriage Act (DOMA) was unconstitutional. Under DOMA, the words marriage and spouse in any federal law or regulation referred only to a spouse of the opposite sex. Justice Anthony Kennedy, writing for the majority, stated that “DOMA is unconstitutional as a deprivation of the liberty of the person protected by the Fifth Amendment.” He also noted that the opinion was applicable only in those states where same-sex marriage is legally recognized. Under DOMA, when the term “spouse” was used in the Internal Revenue Code (IRC) or the Employee Retirement Income Security Act (ERISA), it referred only to opposite sex spouses. For employers sponsoring ERISA-covered health and retirement plans in states that recognized same-sex marriage, this resulted in same-sex spouses being precluded from receiving the same treatment as opposite-sex spouses.

 

Retirement Plans

  • Since a same-sex spouse is not deemed to be a spouse under ERISA, plans were not required to provide a qualified joint and survivor annuity (QJSA) to a same-sex spouse. Plans were not precluded from offering these benefits.
  • A qualified domestic relation order (QDRO) was not valid for a same-sex spouse.
  • A same-sex spouse would not be allowed to defer a death benefit until the year after the participant would have attained age 70 ½. The same-sex spouse would be treated as a non-spousal beneficiary, required to receive full benefits within five years of the participant’s death, or begin to receive benefits by December 31 of the year following the participant’s death.
  • For the purpose of calculating a required minimum distribution, a same-sex spouse would not be considered a spouse.

In the wake of the Supreme Court’s ruling, all of the examples cited above will be changed, and same-sex spouses will be afforded the same rights and privileges as opposite-sex spouses in those states that recognize same-sex marriage. The finding that DOMA is unconstitutional does not have an effect in those states that do not recognize same-sex marriage, and a same-sex spouse would not be treated as a spouse under a plan in those states.

 

It is expected that the Department of the Treasury, the Internal Revenue Service and the Department of Labor will be issuing guidance on the tax and administrative implications of the DOMA decision. As a result of the decision and expected guidance, plan sponsors may need to review their plans and administrative procedures. The Court’s ruling raises a question about the retroactive nature of spousal benefits in those states that recognize same-sex marriage. We will continue to keep you updated about new developments.

 

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Financial Partner (IFP), a registered investment advisor. IFP and Longfellow Advisors are separate entities from LPL Financial