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PSCA Urges Treasury to Apply Same Sex Marriage Rules Prospectively

PSCA joined several other organizations on a joint letter to the Department of Treasury regarding the impact of the United States v. Windsor decision on retirement plans.

PSCA joined several other associations on a letter urging anticipated Department of Treasury guidance on the impact of the United States v. Windsor decision on retirement plans to be required to be applied on a prospective-only basis.  The IRS issued the first round of guidance on August 29, 2013 (see the August Executive report), and mandated a prospective (as of 9/16/13) state of celebration approach for determining spouse status for federal tax purposes, including qualified retirement plans.  In that guidance, the Service promised further guidance for employee benefit plans, taking into account “the potential consequences of retroactive application to all taxpayers involved, including the plan sponsor, the plan arrangement, employers, affected employees and beneficiaries.”  

As the letter explains, retroactive recognition of same sex spouses will result in severe and complex compliance issues and costs, particularly when benefits have already been paid.  In addition to distribution issues, problems could arise regarding required minimum distributions, rollovers, hardship distributions, loans, and nondiscrimination testing.  Treasury and the IRS have statutory authority (IRC Section 7805(b)(8)) to issue the anticipated ruling on a prospective-only basis. 

Click here to read the letter.