Update: What does the Supreme Court’s DOMA ruling mean for qualified defined benefit plans?

On August 29, 2013, the IRS issued Revenue Ruling 2013-17, which addresses some, but not all, of the questions relating to the Supreme Court decision which struck down section 3 of the Defense of Marriage Act (DOMA) earlier this year. The holdings of the Revenue Ruling will be applied prospectively as of September 16, 2013.  In addition, retroactive application is permitted, within limitations.

The Revenue Ruling clarifies the following:

  • If individuals are lawfully married under state law, they are married for Federal tax purposes, effective with the 2013 tax year.  Domestic partnerships, civil unions, or other formal arrangements are not considered “marriage” for Federal tax purposes.
  • Marital status is based on the laws of the state where the marriage was initially established.  That is, if a same-sex couple entered into a legal marriage in any state, but they currently live in a state which does not recognize or allow same-sex marriage, the marriage is still recognized for Federal tax purposes.
  • Employer-provided health coverage benefits or fringe benefits which had previously been taxable to same-sex married spouses are now excludable from income in the same manner as benefits for opposite-sex spouses.
  • Individual tax filings within the applicable statute of limitations (i.e. 2010, 2011, and 2012) may be amended to reflect the change in marital status.  Any amended filings must revise all items that are affected by the marital status reported on the filing.

The Revenue Ruling does not address retroactive application related to other employee benefits, such as pension plans.  The ruling states that “the Service intends to issue further guidance which will provide sufficient time for plan amendments and any necessary corrections so that the plan and benefits will retain favorable tax treatment for which they otherwise qualify”.

The full text of the Revenue Ruling can be found at www.irs.gov/pub/irs-drop/rr-13-17.pdf

This entry was posted in Cash Balance, Defined Benefit Plans, Informational, Plan Design, Retirement Planning, Tax Implications. Bookmark the permalink.

Comments are closed.