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The U.S Supreme Court’s historic ruling in Obergefell v. Hodges granted equal marriage rights to same-sex couples in all 50 states. With this ruling, more same-sex couples are now entitled to the same financial, tax and estate planning benefits as opposite-sex couples, including under employer-sponsored benefits. As a result of the decision, complications and inconsistencies among plans in states that previously did not recognize same-sex marriages will be largely eliminated and the expansion of spousal benefits could help improve retirement outcomes for many of your employees.
Since you may have questions about what this decision means to you as a plan sponsor, and the actions you may need to take to comply with the ruling, we have prepared this fact sheet to help you better understand the ruling, its implications and regulatory requirements.The road to equality
The precursor to the Obergefell ruling was the June 2013 U.S. v. Windsor decision in which the Supreme Court struck down the portion of the Defense of Marriage Act (DOMA) that prevented the federal government from refusing to recognize legally married same-sex couples. The Windsor decision opened the door to more than 1,000 rights and benefits available to opposite-sex couples and their children at the federal level alone.
As a consequence of Windsor, the IRS and Department of Labor provided guidance to help bring retirement plans into compliance. But while Windsor granted federal recognition to same-sex marriage, it did not require states themselves to solemnize same-sex marriage nor to recognize marriages performed in other states. This created particular administrative challenges for employers in states that did not recognize marriages. Additionally, because of statutory language, the Social Security and Veterans Affairs Administrations were unable to provide equal benefits to married same-sex couples living in non-recognition states.
This all changed on June 26, 2015, when the Supreme Court held in Obergefell that same-sex couples have the right to marry under the Fourteenth Amendment to the U.S. Constitution. The Court further held that there is no basis for a state to refuse to recognize a lawful same-sex marriage performed in another state merely because the marriage is between two people of the same sex. Simply stated, state laws that banned same-sex marriage became invalid.What does the ruling mean for plan sponsors?
The ruling simplifies the administration of retirement and other employee benefit plans with regard to same sex marriage. However, you may need to take the steps listed below to ensure you are in compliance with the ruling and your employees understand the benefits to which they are entitled—particularly in states that had not previously recognized same-sex marriages.Additional implications of the ruling
Obergefell has not resolved every issue that grew out of the Windsor ruling. Perhaps the most important question that remains to be answered is whether either ruling is to be applied retroactively? We will continue to monitor developments closely and keep you informed of further guidance or announcements.
Plan sponsors and participants should consult with their ERISA or tax legal counsel concerning these rules and the information provided in this fact sheet. TIAA-CREF does not provide legal advice.
This material is for informational purposes only and the statements made above represent TIAA-CREF’s understanding of applicable law. Neither TIAA-CREF (nor its affiliates, distributors, employees, representatives and/or insurance agents) provide legal or tax advice.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.