In United States v. Windsor, the Supreme Court found that a provision of the Defense of Marriage Act which stated that only persons of the opposite sex could be recognized as married for purposes of federal law is unconstitutional. This means that in the thirteen states and the District of Columbia, where same –sex marriage is legal, retirement, health and welfare benefits provided to same-sex couples will receive a favorable tax treatment on both state and federal levels.
This decision impacts more than 1,300 federal laws, including the Internal Revenue Code and Employee Income Security Act (ERISA), which govern retirement and welfare plans. More time is needed to determine the precise impact of this decision on those states which amended their constitution to recognize only a union between couples of different sexes as a valid marriage.
The following aspects of Retirement Plans are impacted by this decision:
- Rollover Distribution option availability to surviving spouses in a same-sex marriage
- Ability to consider same-sex spouse’s age when computing a Required Minimum Distribution
- Protection of spousal interest in certain retirement plan distribution options
- Spousal consent rules for retirement plan loans
- Ability to take a hardship distribution to provide for medical, tuition, and funeral expenses
- Beneficiary designation ordering rules
- Eligibility of a same-sex spouse to receive a distribution pursuant to a Qualified Domestic Relations Order in divorce proceedings
We anticipate that the Internal Revenue Service will be issuing guidance on how this Supreme Court decision should be reflected in the way plan documents are written and operated. While we do not anticipate that this decision will require amendments to plan documents provided by First Allied Retirement Services, we are working and will continue to work closely with plan document providers to make a proper assessment in light of future IRS guidance.
In the meantime, if you encounter circumstances which may be impacted by the recent Supreme Court ruling, please reach out to your subject matter experts at First Allied Retirement Services firstname.lastname@example.org or (888) 926-0600.