On April 4, 2014, the IRS issued Notice 2014-19, providing guidance on the application, including the retroactive application, of the US Supreme Court's decision in United States v. Windsor (holding that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional) and the holdings of Revenue Ruling 2013-17, to qualified retirement plans (I.R.S. Notice 2014-19, (Apr. 5, 2014)).

In Windsor, the Supreme Court ruled that Section 3 of DOMA, which defined the terms "spouse" and "marriage" for purposes of federal law (including the Internal Revenue Code (IRC) and ERISA) as being solely between one man and one woman, was unconstitutional on Fifth Amendment grounds (see Legal Update, Supreme Court: DOMA Section 3 is Unconstitutional and Proposition 8 Proponents Lack Standing).

Subsequent to the Windsor decision, Revenue Ruling 2013-17 was issued, which:

(See Legal Update, IRS Adopts Same-sex Marriage Recognition Rule.)

Notice 2014-19 (Notice) provides guidance on certain unanswered questions on the application of the decision in Windsor and the holdings of Revenue Ruling 2013-17 to qualified retirement plans.

The Notice provides that any IRS retirement plan qualification rule that applies because a participant is married must be applied to a participant who is married to an individual of the same sex.

For example, a participant in a plan subject to the rules of IRC Section 401(a)(11) who is married to a same-sex spouse, cannot waive a Qualified Joint and Survivor Annuity (QJSA) without obtaining the required spousal consent under IRC Section 417.

The Notice provides that qualified retirement plans:

However, the Notice indicates that recognizing same-sex spouses for certain plan qualification requirements may be difficult to implement retroactively and may create unintended consequences. For example, the retroactive application of the rules might be difficult to implement if a plan had already paid benefits to a participant or beneficiary.

Provided the qualification requirements are otherwise satisfied, if a plan sponsor chooses a date before June 26, 2013 to recognize same-sex spouses, the qualified status of the plan will not be affected. For example, a plan sponsor may amend its plan to reflect the outcome of Windsor for a period before June 26, 2013 for the QJSA and Qualified Preretirement Survivor Annuity requirements of IRC Section 401(a)(11) for participants with annuity starting dates or dates of death on or after a specified date.

The deadline to adopt a plan amendment is the later of:

Amendments are required if a plan's terms either:

If a plan sponsor chooses to apply the rules in a manner that reflects the outcome of Windsor for a period before June 26, 2013, the amendment must specify:

Amendments are generally not required if the plan's terms are not inconsistent with the outcome in Windsor, the guidance in Revenue Ruling 2013-17 or the Notice. For example, an amendment would generally not be required for the following terms if they are used in a plan without any distinction between a same-sex spouse or an opposite-sex spouse:

If no amendment is required the plan must still be operated according to the outcome of Windsor, the guidance in Revenue Ruling 2013-17 and the Notice.

Under IRC Section 436(c), a single-employer defined benefit plan cannot be amended to increase its liabilities unless:

(See Practice Note, Benefit Restrictions under IRC Section 436.)

Generally, amendments to comply with Windsor that are effective on June 26, 2013 are not subject to the prohibitions under IRC Section 436 against increasing plan liabilities for underfunded plans.

However, if a plan sponsor chooses to apply the rules for married participants in qualified retirement plans in a manner that reflects the outcome of Windsor for a period before June 26, 2013, then the prohibitions under IRC Section 436 apply.

This long awaited guidance answers some of the questions regarding how Windsor applies to qualified retirement plans retroactively. However, one important question that remains unanswered is how the rules apply to claims by participants and beneficiaries for retroactive benefits. Plan sponsors should begin to determine if amendments are required and if the amendments should apply retroactively and amend their plans by the applicable deadline.