Senior Director | CAPTRUST Head of Professional Services
In late June, the U.S. Supreme Court declared a portion of the Defense of Marriage Act (DOMA) unconstitutional, which will likely result in changes to how retirement benefits are handled in the cases of divorce and death. These changes will also likely affect beneficiary regulations and spousal rights at the time of certain distributions.
What to Expect:
• Both the Internal Revenue Service and the Department of Labor will issue guidance for processing benefits for same-sex couples.
• Employers will need to put in place new procedures for identifying same-sex couples, processing distributions, and providing spousal rights according to the new rules.
• Pension plans will need to consider that same-sex partners may be entitled to joint and survivor benefits.
• Defined contribution plans require that the spouse receive one-half of the death benefit if the right to receive it has not been waived.
• Many defined contribution plan documents provide that if a participant dies without having named a beneficiary, then the spouse is the first beneficiary in the hierarchy, often followed by the children, parents, and estate. It will be important to understand who the legal spouse is, in light of this ruling, before paying out benefits.
• States differ as to whether or not they recognize same-sex marriage, so identifying a legal spouse will be an issue for employers who have employees in a wide variety of states or employees who move among states.
There are still many outstanding questions about how the rollback of DOMA provisions will impact the benefits landscape. We will do our best to keep you informed as we learn more. In the meantime, please contact your financial advisor with specific questions or to request more information.