IRS issues post-Obergefell retirement and welfare plan guidance

The IRS has issued guidance on the effect of the U.S. Supreme Court decision in Obergefell v. Hodges on qualified retirement plans and health and welfare plans. The IRS states that this guidance relates solely to the application of federal tax law concerning same-sex spouses.


In United States v. Windsor, the Supreme Court held that Section 3 of the Defense of Marriage Act, which generally prohibited the federal government from recognizing the marriages of same-sex couples, was unconstitutional. The IRS subsequently issued IRS Rev. Rul. 2013-17, providing guidance on the federal tax ramifications of Windsor and later released guidance for qualified retirement plans on how to treat same-sex marriages. As a result of Windsor and Rev. Rul. 2013-17, marriages of same-sex spouses that were valid in the state where they were entered into, including marriages entered into in previous years, were recognized for federal tax law purposes. Notices 2014-19 and 2014-37 generally provide guidance on amending qualified retirement plans to comply with Windsor.

The IRS also issued Notices 2013-61 (I.R.B. 2013-44, October 28, 2013) and 2014-1 (I.R.B. 2014-2, January 6, 2014). Notice 2013-61 applies Windsor and Rev. Rul. 2013-17 to employment taxes, including procedures for adjustments or claims for refunds or credits. Notice 2014-1 also applies Windsor and Rev. Rul. 2013-17, providing guidance on elections and reimbursements for same-sex spouses under cafeteria plans, flexible spending arrangements and health savings accounts.

Finally, in June 2015, the Supreme Court in Obergefell v. Hodges ruled that states are prohibited under the 14th Amendment from refusing to either license same-sex marriages or recognize such unions performed in other states. Obergefell did not change the federal tax law, since same-sex marriages performed in other states have already been recognized for federal tax law purposes pursuant to Windsor and the post-Windsor guidance. The IRS does not anticipate any significant impact from Obergefell on the application of federal tax law to employee benefit plans. However, the IRS recognizes that employers may want to take the occasion to provide a discretionary expansion of benefits in the wake of the decision that is not required under federal tax rules, and employers may have transitional issues with respect to their health and welfare plans.

Retirement plans

The IRS states that qualified retirement plans are not required to make additional changes to their plans as a result of Obergefell. Under Windsor and Notice 2014-19, any plan amendments required to recognize same-sex spouses and their marriages with respect to Code Sec. 401(a) qualification requirements are already required to be adopted and effective (with a possible delayed amendment deadline for governmental plans). However, a plan sponsor may decide to amend its plan following Obergefell to make certain optional changes or clarifications in the form of discretionary amendments. The IRS is permitting employers to make discretionary amendments to broaden rights or benefits to same-sex spouses, but cautions that any amendment to retirement plans must otherwise comply with applicable qualification rules (including nondiscrimination requirements). In addition, single-employer defined benefit plans, under Code Sec. 436(c), must be sufficiently funded for the change. Furthermore, under section 5.05(2) of IRS Rev. Proc. 2007-44, the deadline to adopt these discretionary amendments is generally the end of the plan year in which the amendment is operationally effective.

According to the IRS, a plan sponsor that has not yet made a retroactive amendment to recognize same-sex marriages for a date earlier than June 26, 2013, in accordance with Notice 2014-19, may decide to make such an amendment after this current guidance is issued. This amendment will not cause the plan to lose its qualified status, provided the amendment otherwise complies with Q&A-3 of Notice 2014-19.

Health and welfare plans

As with the retirement plans, Obergefell does not require that a sponsor of a health or welfare plan change the terms or operation of its plan. However, if a health or welfare plan does offer benefits to the spouse of a participant, Obergefell could require changes to the operation of the plan to the extent that the decision results in a change in the group of spouses eligible for coverage under the terms of the plan (e.g., coverage is offered to the spouse of a participant as defined under applicable state law, which has changed as a result of Obergefell).

A cafeteria plan that allows participants to make a change in election (or is amended to allow a change in election—see below) due to a significant improvement in coverage under an existing coverage option may permit a participant to revoke an existing election and submit a new election if same-sex spouses first become eligible for coverage under the terms of the plan during the coverage period for any reason. This new election may be an election by a participant to add coverage for a same-sex spouse to a benefit option in which the participant is already enrolled, or an election by a participant who had not previously elected coverage to add coverage for the participant and a same-sex spouse.

If the terms of a cafeteria plan do not allow participants to make a change in election due to a significant improvement in coverage during the coverage period under an existing coverage option, a plan sponsor may amend the plan at any time to permit participants to make a change in election. In the case of a change due to the plan recognizing same-sex marriages, the amendment must be adopted no later than the last day of the plan year including the later of (i) the date same-sex spouses first became eligible for coverage under the plan, or (ii) December 9, 2015. Such an amendment may be retroactive to the date same-sex spouses first became eligible for coverage under the plan.

Notice 2014-19 is amplified.

Source: IRS Notice 2015-86.

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