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The IRS Issues Ruling on Same-Sex Marriages

09.04.13

by T. Mark Edwards and Michael A. Abbott

The Internal Revenue Service released Revenue Ruling 2013-17 (“IRS Ruling”) on Aug. 29, 2013 (available here (PDF)) in connection with the U.S. Supreme Court’s ruling earlier this summer regarding same-sex marriages (i.e., the Windsor case). The IRS ruling addresses the federal tax consequences resulting from the Windsor decision with respect to same-sex, legally married spouses. It’s entirely possible that employee health, welfare and retirement plans will be impacted. The ultimate impact on health and welfare plans will depend on how a sponsoring company’s health and welfare benefit programs are structured (and involve items such as the tax treatment of the coverage, COBRA benefits based on newly-recognized qualifying events, IRC Section 125 benefit administration, such as eligibility for a mid-year election change, HIPAA special enrollment rights, FMLA rights and reimbursements under a HRA).

For a sponsoring company’s 401(k) or other qualified plan, a same-sex spouse will be the default beneficiary of the participant and would be required to provide written consent to the designation of a non-spouse beneficiary (and a plan sponsoring company will want to make sure it determines if a same-sex spouse exists before paying death benefits to another beneficiary so that the benefits are not paid twice). The status of an individual as a same-sex spouse also could affect a 401(k) plan’s hardship distribution determinations. For any benefit under a 401(k) or other qualified plan that is payable in the form of a joint and survivor annuity, a same-sex spouse will have to consent to an optional form of benefit and will be entitled to the pre-retirement survivor annuity benefit.

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