The U.S. Department of the Treasury and the IRS released Revenue Rule 2013-17, providing guidance to clarify that same-sex couples who are legally married in jurisdictions or countries that recognize their marriages will be treated as married for all federal tax purposes. This was in response to the earlier Supreme Court’s ruling on parts of the Defense of Marriage Act (DOMA). This rule affects qualified retirement plans such as 401(k)s, 403(b)s, 457 plans, and other employer sponsored plans in that:
- The plan must treat a same-sex spouse as a spouse, for purposes of rules relating to qualified retirement plans.
- The plan must recognize a same-sex marriage that was validly entered into in a jurisdiction whose laws authorize the marriage, even if the married couple lives in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages.
- A person who is in a registered domestic partnership or civil union is not considered to be a spouse, regardless of whether that person’s partner is of the opposite or same sex.
The impact of this ruling will affect several important operational issues involving the participant’s spouse:
- Entitlement to benefits as the result of a Qualified Domestic Relations Order (QDRO) permitting a non-taxable distribution due to divorce.
- Granting hardship distributions used to pay for a spouse’s medical, tuition, or funeral expenses.
- Rollover of death benefits by a participant’s spouse to an IRA, without tax implications.
- Spousal consents for loans and distributions.
- Survivor benefits for plans, providing a qualified joint and survivor form of annuity payments when the employee retires.
- The ability of a participant’s spouse to defer the payment of death benefits and not requiring the immediate start of minimum distributions.
- Waiver of death benefits that are automatically provided to a participant’s spouse.
Revenue Ruling 2013-17 does not say these rules also apply to nonqualified retirement plans, such as SEP IRAs, SIMPLE IRAs, etc. The IRS “intends to issue further guidance on how qualified retirement plans and other tax-favored retirement arrangements” will be affected.