Pillsbury Winthrop Shaw Pittman

IRS releases further guidance for retirement plans on treatment of same-sex spouses

By Susan P Serota, Peter J Hunt, Christine L Richardson and Kathleen D Bardunias

In IRS Notice 2014-19 and accompanying FAQs, the Internal Revenue Service (IRS) issued long-awaited guidance addressing the treatment of same-sex spouses under qualified retirement plans such as 401(k) and defined-benefit plans. Employers that sponsor qualified retirement plans should review this guidance now and determine whether further action, including plan amendments or corrective action, is required.

On 26 June 2013, the US Supreme Court in United States v Windsor held that section 3 of the Defense of Marriage Act — which limited the definition of ‘marriage’ to marriage between a man and a woman for all purposes under Federal law — was unconstitutional. In response to that decision, the IRS released Revenue Ruling 2013-17 indicating that, effective as of 16 September 2013, same-sex spouses would be treated as married for all federal tax purposes as long as the marriage was validly entered into in a state or country whose laws authorise same-sex marriage (generally referred to as the ‘state of celebration’ rule).

The Windsor decision affects several rules under the Internal Revenue Code with respect to married participants in qualified retirement plans, including rules that relate to qualified joint and survivor annuities (QJSAs), qualified pre-retirement survivor annuities (QPSAs), spousal rollovers and required minimum distributions, qualified domestic relations orders (QDROs) and stock ownership attribution rules. While both the Windsor decision and Revenue Ruling 2013-17 clearly affected employee benefit plans prospectively, they did not address the extent to which the Windsor decision needed to be applied retroactively…

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