New IRS Guidance: Qualified Retirement Plans Must Recognize Same-Sex Marriages Retroactively to June 26, 2013

May 1, 2014

The IRS has recently issued guidance on how qualified retirement plans (such as 401K plans, profit sharing plans, defined benefit pension plans and 403B plans) should apply the Supreme Court’s 2013 Windsor decision, which ruled that same-sex marriages must be recognized for all federal tax purposes. While the IRS had already issued guidance indicating that all qualified retirement plans would need to prospectively recognize all same-sex marriages, it had not addressed whether plans would need to be retroactively amended to either the date of the Windsor ruling or to another date. This guidance clarifies that qualified retirement plans that have sections that would not comply with the Windsor ruling (for example, plans that refer to opposite- sex couples) must be retroactively amended to recognize same-sex spouses effective June 26, 2013. The deadline to adopt a plan amendment to this effect is the later of: 1) December 31, 2014 or 2) the cyclical remedial plan amendment period under section 5.05 of Rev. Proc. 2007-44.

Affordable Care Act- Congress Eliminates Cap on Deductibles

The deductible cap for small group health plans under the Affordable Care Act has been permanently removed. Originally, the Affordable Care Act (ACA) had a provision that capped the deductible for individual and small group health plans at $2,000 for individuals and $4,000 for families. Last year, when it became evident that it would be difficult for many plans to comply with that requirement, the Health and Human Services Department issued a waiver for 2014. Now, through a bipartisan effort, that provision has been eliminated entirely in an effort to help issuers to design plans that work well for small business owners. It will also allow small businesses to continue trending towards High-Deductible Health Plans coupled with Health Savings Accounts. However, there are many other plan design requirements delineated in the ACA that still apply to small employers, including the limit on out-of-pocket maximums for essential health benefits.