Supreme Court Decision on DOMA & Retirement Plans

Transamerica, one of our retirement plan providers issued this narrative we’d like to pass on:



What does it mean for Employer-Sponsored Retirement Plans?

Section 3 of the federal Defense of Marriage Act (DOMA) enacted in 1996 was ruled unconstitutional by the Supreme Court on Tuesday. Under that section of DOMA, the term “marriage” is defined as the legal union between one man and one woman as husband and wife.

The federal definitions of “spouse” and “marriage” under DOMA affect the availability of numerous retirement benefits and rights to same sex spouses under the Internal Revenue Code (“IRC”) and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In the retirement plan area, same sex spouses have not been legally recognized as married because of DOMA. A few examples of these retirement plan provisions include:

• Survivor benefits in the form of a Qualified Joint and Survivor Annuity;

• Qualified Domestic Relations Orders;

• Application of benefit limitations under IRC Section 415;

• Spousal consent;

• Qualified Optional Survivor Annuity;

• Qualified Pre-Retirement Survivor Annuity;

• Timing of death benefit payments and required distribution rules;

• Rollover rules as applicable to eligible rollover distributions;

• Beneficiary status; and

• Hardship withdrawal provisions.

While some plans may have chosen to extend certain retirement benefits to non-spouse beneficiaries (e.g., survivor annuities), under DOMA plans were not required to do so.

Transamerica Retirement Solutions will be reviewing the DOMA decision in the coming days to determine the implications for our employer-sponsored retirement plans now that federal law recognizes same sex marriages that are entered into pursuant to state law. Currently 12 states (Connecticut, Delaware, Iowa, Massachusetts, Maine, Maryland, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington) plus the District of Columbia recognize same sex marriages. In light of the Supreme Court decision in Hollingsworth v. Perry, this list will soon likely include California.

As a result of the Supreme Court’s decision on DOMA, some immediate questions that employers will have include the following:

• Is the DOMA decision retroactive?

o Will employers be required to provide survivor benefits to same sex spouses for prior periods?

o Will plans be disqualified for not providing survivor benefits to same sex spouses in the past?

• How will plans be administered differently?

o How is a person’s marital status determined?

o Will plan administrators need to track the participant’s residence?

• What benefits would now be required to be provided to same sex spouses?

• What additional notices will be required to be given to same sex spouses?

• What are the implications for nonqualified plans?

• Will any forms such as beneficiary designation forms need to be revised?

• How will this decision impact non-ERISA plans?

• What changes, if any, will be needed to plan documents and Summary Plan Descriptions?