Guidance Provides Administrative Relief On Spousal Benefit Issues, Practitioners Say


The guidance in Revenue Ruling 2013-17 will trigger major changes in beneficiary status by requiring spousal consent where none was required before, a benefits attorney said concerning a Treasury Department and Internal Revenue Service ruling issued Aug. 29.

Under that ruling, same-sex spouses legally married anywhere in the U.S. are automatically the beneficiaries of federally regulated plan benefits, and if plan participants who are married to same-sex spouses want to name another beneficiary, they now need same-sex spousal consent, Todd A. Solomon, a partner at McDermott Will & Emery in Chicago, told BNA the day of the ruling.

In cases in which someone married to a same-sex spouse a year ago named a child as beneficiary, the same-sex spouse now is automatically the beneficiary unless the participant revises the beneficiary form, names the child as beneficiary and gets same-sex spousal consent, he said.

The Treasury and IRS guidance implements federal tax aspects of the June 26 U.S. Supreme Court decision that invalidated a key provision of the 1996 Defense of Marriage Act, the revenue ruling said. It applies to any same-sex marriage recognized in any of the 50 states, the District of Columbia, U.S. territories or a foreign country. Same-sex marriage is legal in 13 states and the District of Columbia.

Survivor Annuities

The ruling will have a major impact on spousal rights under defined benefit pension plans and defined contributions plans, Solomon said. Defined benefit plan joint and survivor annuities and pre-retirement survivor annuity coverage now apply to legally married same-sex spouses, “which is a very big deal,” he said.

It is a major change for defined benefit plan sponsors because it represents new benefits that companies will have to pay, “including companies that are only in states that do not recognize same-sex marriage,” Solomon said.

The ruling answered many questions for benefit practitioners regarding beneficiary status but left some important questions about retroactive benefit claims—paid and unpaid—for later guidance, he said.

“It would be not crazy necessarily for the IRS to require that a plan go back and pay a death benefit to a same-sex spouse” in a situation, for example, in which the plan participant died six months ago, Solomon said.

On the other hand, plan sponsors wouldn't welcome guidance that required them to “pay twice or recalculate” a benefit that has already been paid or already commenced, he said.

Treasury and the IRS might be reluctant to establish a retroactive claim to benefits, especially judging from the practical approach they displayed in Revenue Ruling 2013-17, Solomon said. “I don't think they will, if I had to guess,” he said.

Practitioners reacting to the ruling commented on the practical nature of the Treasury and IRS guidance.

“The guidance clarifies, at least for federal taxation purposes, that if you are legally married in a jurisdiction that permits same-sex marriage, then you will be treated as married no matter where you live,” said Kathryn Wilber, senior counsel for health policy at the American Benefits Council in Washington.

“That eliminates administrative headaches for employers who may have employees who live in various jurisdictions or who move,” Wilber said.

Excerpted from a story that ran in Pension & Benefits Daily (9/3/2013).