IRS Applies Obergefell Decision to Retirement Plans

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The Internal Revenue Service has issued a notice that provides guidance on the Supreme Court’s decision in the Obergefell same-sex marriage case to retirement plans, along with health and welfare plans.

Notice 2015-86 provides guidance on the application of the decision in Obergefell v. Hodges to retirement plans qualified under Section 401(a) of the Tax Code and to health and welfare plans, including cafeteria plans under Section 125. The guidance relates solely to the application of federal tax law with respect to same-sex spouses.

The Obergefell decision, which the Supreme Court handed down in June, requires all states to issue marriage licenses to same-sex couples and to recognize same-sex marriages that have been validly performed in other states. The decision expands on the court’s 2013 decision in the case of U.S. v. Windsor, which struck down the Defense of Marriage Act and recognized same-sex marriages for federal tax purposes. In response to the Windsor decision, the IRS and the Treasury promulgated regulations to clarify the complex interplay between the changing federal tax law, which recognized same-sex marriages, and those in the states that did not recognize it. In the aftermath of the Obergefell decision the latest notice provides guidance on how the ruling will affect retirement plans, along with health and welfare plans.

Because Obergefell requires that states recognize marriages of same- sex couples performed in other states, certain marriages performed in previous periods will be recognized for the first time for state law purposes, the IRS noted. However, because these same marriages have already been recognized for federal tax law purposes pursuant to Windsor and the IRS’ post-Windsor guidance, the Treasury and the IRS do not anticipate any significant impact from Obergefell on the application of federal tax law to employee benefit plans.

The Treasury and the IRS said they understand, however, that some plan sponsors may alter aspects of their employee benefit plans , or how their plans are administered, in response to Obergefell. In addition, some plan sponsors have asked for clarification of the application of Obergefell to certain changes to employee benefit plans, such as a discretionary expansion of benefits that is not required under the federal tax rules. The notice provides a series of questions and answers to provide guidance to address these issues.