As recognition and acceptance of same-sex marriage continues to spread across the country, a number of Human Resources-related implications of the new reality are coming into play. One such implication is the treatment of same-sex spouses under pension plans and 401(k) plans as governed under the Employee Retirement Income Security Act (ERISA).
In April the Internal Revenue Service addressed this matter when it issued Notice 2014-19, which sets forth the rules for recognition of same-sex spouses in retirement plan administration. The IRS was required to issue a ruling on the subject pursuant to the U.S. Supreme Court’s decision in U.S. vs. Windsor, which struck down Section 3 of the Defense of Marriage Act (DOMA) which had limited federal recognition of marriage only to heterosexual couples.
The IRS Notice requires qualified retirement plans to recognize the same-sex spouse of a participant as of June 26, 2013, the date of the Windsor decision. Same-sex spouses are to be recognized by a plan as long as they were married in a state that recognizes same sex marriage, regardless of whether same-sex marriage is recognized in the state in which they work or live. This basis for determination of validity of a same-sex marriage is called the State of Commitment Standard, referring to the state where the spouses made their commitment.
Notice 2014-19 requires recognition of same-sex spouses for purposes of:
- Providing survivor benefits
- Obtaining spousal consent
- Making required minimum distributions
- Accepting qualified domestic relations orders
- Issuing hardship withdrawals
- Carrying out other retirement plan administrative functions
The IRS does not require plan sponsors to retroactively apply same-sex spousal recognition standards prior to June 26, 2013, but allows plans to apply such standards prior to that date if desired. Qualified retirement plans whose terms are currently inconsistent with U.S. v. Windsor and the State of Commitment Standard must be formally amended to comply with the ruling and standard and generally have until December 31, 2014 to adopt an amendment.
Many more questions remain in the HR and Benefits area. Are employers required to cover same-sex spouses under health care benefits? If so, should the standard be the State of Commitment or the state in which the couple resides or works? Because federal rules do not stringently lay out requirements for welfare plans as they do for retirement plans, many feel employers need not do so currently, but that failure to offer benefits for same-sex spouses will ultimately leave such employers vulnerable to discrimination claims.
Other open questions include the interpretation of “spouse” under the Family and Medical Leave Act (FMLA).