Group ignites debate on retirement plan benefits for same-sex couples

Spark Institute proposes uniform rule based on where couples were married

Aug 15, 2013 @ 3:44 pm

By Darla Mercado

Uncertainty over how to handle retirement plan benefits for employees in same-sex marriages continues to hang over the heads of plan sponsors and 401(k) service providers.

The Spark Institute Inc., an advocacy group for record keepers, insurers and other plan service providers, sent a letter to officials of the Labor and Treasury departments today, requesting that the two agencies provide guidance on how to best administer retirement plans after the U.S. Supreme Court's decision to repeal Section 3 of the Defense of Marriage Act.

The biggest concern hanging over the heads of retirement plan sponsors and their providers is how to determine marital status for the purpose of the retirement plan itself: Will same-sex spouses be considered beneficiaries regardless of where they reside? What happens if they live in a state that recognizes only civil unions or domestic partnerships?

In the letter, Spark's general counsel, Larry H. Goldbrum, suggested that the Labor and Treasury departments make things simpler for plan sponsors and providers by applying a uniform rule: Determine marital status based on where these couples were married rather than their domiciliary state — where they end up residing.

“It's easier to have a state-of-celebration status,” Mr. Goldbrum said in an interview. “Once you're married, you can't change where you got married. But a couple can move afterward. With a state of domicile rule, there are traps for individuals who may not be aware of how the plans operate and the implications.”

For instance, a gay couple who marry in Maryland are entitled to rights and protections there because the state recognizes same-sex marriage. The spouses can be beneficiaries of each other's retirement plans. But if the couple winds up moving to Virginia, such a move could result in a change of beneficiary under the retirement plan unless the spouse is already named in the plan forms, Mr. Goldbrum explained.

Retroactive rights are another matter of concern: What about same-sex spouses who may have not been considered married when certain plan features were triggered, such as a benefit payment or a domestic-relations order?

“It will likely be impracticable to provide retroactive notice and rights to a spouse who was not treated as such when an employee/plan participant requested a lump-sum distribution from a plan that would have otherwise required spousal consent before making such a payment,” Mr. Goldbrum wrote. It would be “onerous” for plan sponsors to chase down those would-be beneficiaries, he noted.

As an alternative, Spark suggests that the Treasury and Labor departments weigh those difficulties when arriving at a decision on how far back DOMA will apply to retroactive benefits. Ideally, plan sponsors would be able to limit, when appropriate, the retroactive effect to July 21, which is the date the Supreme Court's ruling went into effect, Mr. Goldbrum wrote in the letter.

Above all, Spark is asking both departments to go easy on plan sponsors and permit them to make good-faith efforts toward complying with whatever guidance the agencies release. “Plan sponsors shouldn't be facing unreasonable enforcement actions when there is no precedence or guidance,” Mr. Goldbrum said.

Sen. Ben Cardin, D-Md., also wrote Treasury Secretary Jack Lew and Acting Commissioner Daniel Werfel yesterday, requesting clear guidance on the tax treatments for same-sex couples and asking the IRS to address whether civil unions in certain states could be treated as marriages.

“Especially for taxpayers in same-sex marriages who, perhaps anticipating the Windsor decision, filed extensions for their 2012 returns, it is critical that the Internal Revenue Service promptly issue guidance confirming their filing status,” Mr. Cardin wrote in his letter.

Calls to Mike Trupo, a spokesman for the Labor Department, and Sabrina Siddiqui, a spokeswoman for the Treasury Department, were not immediately returned.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

Sep 10

Conference

Denver Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video

INTV

Regulators' gloves are coming off with cybersecurity. Put up your dukes with these tips

Updated guidelines and some of the first-ever rule enforcements signal that regulators are getting serious about holding firms accountable for data breaches, according to special projects editor Liz Skinner and technology reporter Ryan Neal.

Recommended Video

Keys to a successful deal

Latest news & opinion

Advisers throw cold water on FIRE movement

Millennials love it, advisers don't: Turns out, extreme early retirement is a suitable goal for almost nobody.

10 universities with the most billionaire alumni

These 10 American schools have the greatest number of alumni who are billionaires.

Top-performing ETFs of 2018

The markets took a beating last year, but these exchange-traded funds bucked the trend

Morningstar says investors rushed the exits in 2018

Net flows into mutual funds and ETFs were the lowest since the 2008 financial crisis, while money-market funds captured inflows.

Widow awarded $4.2 million by Finra panel for theft by ex-Royal Alliance broker

The former broker, Gary Basralian, earlier pleaded guilty to theft and is facing up to 20 years in prison.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print