Timely, relevant, and actionable investment perspective, best practices, and planning insights for institutional and wealth management clients from CAPTRUST's Consulting Research Group.

Advanced Filter

IRS Guidance on Recognition of Same-Sex Marriages

On August 29, 2013, the Internal Revenue Service (IRS) released preliminary guidance regarding the recognition of same-sex marriages resulting from the recent rollback of portions of the Defense of Marriage Act. Although most of the IRS guidance is directed toward the federal tax treatment of married individuals as it relates to health care costs, there are several issues that retirement plan sponsors should be ready to address.

For purposes of determining who is married, the IRS is looking at whether someone was married in a state that allows for a legal marriage between same-sex partners. If a party was legally married in such a state, they are considered married for federal tax purposes and regulatory requirements. It does not matter where they live subsequently.

Action Steps

By the September 16, 2013 effective date, employers and plan administrators should take several steps (while awaiting additional guidance on the potential retroactive application of the decision and on plan amendments): 

Treat all same-sex spouses as spouses for plan purposes. This is important for beneficiary designations (obtaining proper spousal consent) and paying plan benefits in the event of death, to ensure that same-sex spouses receive spousal rights and protections. 

Consider sending a participant communication to notify participants of the IRS guidance, and recommend they update participant records (such as beneficiary designation forms), indicate marital status on distribution forms, and provide spousal consent, when required. 

Review and update plan distribution forms and administrative procedures to make sure they reflect the new law. This includes a review of the domestic partner and same-sex marriage procedures and procedures for minimum required distributions, 415(b) limits, QDROs, loans, hardships, rollovers, and QJSA/QPSA benefits. 

Open Questions 

The IRS acknowledges that there are still a number of open questions regarding the application of these rules to qualified retirement plans, for which they plan to issue additional guidance. These questions include: 

How to apply this guidance to periods prior to September 16, 2013

Plan amendment requirements, including the timing of any required amendments

How to correct plan operations, if necessary, for periods prior to the issuance of additional guidance 

In addition, the Department of Labor has yet to issue guidance but will at some point.

Given the September 16 effective date, you should consult your service provider as soon as possible to learn how this guidance from the IRS affects your plan.



CAPTRUST’s Wes Collins on Financial Wellness at Work

PLANSPONSOR recently published an article written by Wes Collins, senior manager of participant advice services at CAPTRUST. Collins explains that plan sponsors should consider educational programs that help their workers understand what financial wellness looks like at different ages and career stages.

Read More