The Supreme Court recently struck down section 3 of the Defense of Marriage Act (DOMA). This means that marriages of same-sex spouses, if legally recognized by a state, must also be recognized for purposes of more than 1,000 federal laws and regulations.
Most of the news coverage that I have seen related to the ruling has been about income taxes, estate taxes, and Social Security benefits. However, federal law also includes several provisions protecting the rights of spouses of participants in a qualified defined benefit plan. While some plans specifically include language related to domestic partnerships, civil unions, and same-sex marriages, others are silent on the issue or specifically exclude benefits for same-sex married participants.
Here are some items related to defined benefit plan administration which will now apply to same-sex married couples:
- Qualified Joint and Survivor Annuity (QJSA): Married participants are required to receive distributions as a QJSA, unless the spouse consents to another benefit option. Same-sex spouses will now be subject to QJSA rules.
- Qualified Pre-retirement Survivor Annuity (QPSA): Federal law specifies that defined benefit plans must provide a minimum death benefit to spouses of vested participants who have been married at least one year. Same-sex spouses will now be eligible for this benefit.
- Qualified Domestic Relations Order (QDRO): Married participants who divorce or are legally separated may submit a Domestic Relations Order (DRO) to the plan administrator. If the plan administrator determines that the DRO is a QDRO, a portion of the participant’s benefit may be assigned to an alternate payee. An alternate payee cannot be anyone other than a spouse, former spouse, child, or other dependent of a participant. Same-sex former spouses who were previously ineligible may now be able to pursue benefits under a QDRO.
There are many unanswered questions about the ruling which will likely be addressed in regulations as time goes on. Plans which currently exclude J&S annuities and/or survivor benefits for same-sex married couples will likely have to be amended to remove that language. The biggest question is whether these provisions will be applied retroactively. For example, could a same-sex married participant who retired a few years ago, but could not elect a J&S annuity at the time, go back and change their election to a J&S annuity with their same-sex spouse as beneficiary? Could a surviving same-sex spouse of a participant who died a few years ago, and was not eligible for any pre-retirement survivor benefits at the time, now apply to receive those benefits?
It is also not clear exactly what will be required for same-sex couples who were legally married in one state but now reside or work in another state that does not recognize same-sex marriages. Section 2 of DOMA, which was not invalidated by the Supreme Court, allows that states do not have to recognize same-sex marriages performed in another state. Even if an employer only does business in one state, their employees may have moved from or been married in other states with different laws, and employers will need to figure out how to track all of this information.
If you or your client sponsor a defined benefit plan that previously or currently treats same-sex married participants differently than opposite-sex married participants, you may need to make prospective or retroactive corrections to your plan to keep it tax-qualified. Contact us if you need assistance or if you have questions about how the Supreme Court’s DOMA ruling will affect your plan.