The Impact of U.S. v. Windsor on Retirement Plans

Supreme Court Ruling on the Defense of Marriage Act 

The U.S. Supreme Court in a landmark case ruled on June 26, 2013, that Section 3 of the federal Defense of Marriage Act (DOMA) is unconstitutional. Section 3 of DOMA defined “spouse” for the purposes of federal law as a person of the opposite sex and that a “marriage” only applied to opposite-sex partners.

In addition to the social and historical implications of this ruling, U.S. v. Windsor has a direct effect on all Qualified Retirement Plans. Under the ruling, to maintain their tax qualified status, plans must recognize same-sex married couples and provide the same benefits as they would to a participant married to a member of the opposite sex. Plan sponsors should specifically review the following areas:

IRS Initiates Compliance Check of 457(b) Top Hat Plans

Earlier this year, the Internal Revenue Service (IRS) announced that its Employee Plans Compliance Unit (EPCU) would begin a compliance check of certain 457(b) plans maintained by non-governmental, tax-exempt entities. These plans, commonly referred to as “Top Hat” plans, are frequently offered by tax-exempt organizations in addition to other qualified retirement plans.

The good news is that the extent of the compliance check is fairly limited. Letters and a questionnaire will be sent to 200 tax-exempt organizations in fiscal year 2013, and another 200 will be sent in fiscal year 2014. Employers will be selected for review based on information contained on 2011 Form W-2 and Form 990.