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Joanne Youn Quoted Concerning Additional Guidance Needed by Employers Following the DOMA Ruling

July 2, 2013, Bloomberg BNA

Bloomberg BNA's Daily Tax Report spoke with Joanne C. Youn regarding detailed guidance needed by employers following the U.S. Supreme Court's decision in ruling Section 3 of the Defense of Marriage Act unconstitutional. Employers will require significant administrative guidance from the federal government in order to extend retroactive and future benefits to the lawfully married, same-sex spouses of employees. Clarification on how same-sex marriages will be treated when couples are domiciled in a state that does not recognize such unions is needed to  help employers file refund claims and craft benefits plans going forward. For the full article, please visit Bloomberg BNA's website.

Excerpt taken from the article.

The most pressing piece of guidance needed by employers is how the Internal Revenue Service will provide retroactive application to employers who operated benefit plans in compliance with DOMA when it was still on the books, Joanne Youn, a member in Caplin & Drysdale's Employee Benefits practice, told BNA June 27.

The court's decision brought some clarity to the 13 states and the District of Columbia where same-sex marriage is already recognized, but "there are several open questions in terms of how this would apply in the other 37 states," Youn said.

Employers in any of the states where gay marriage is recognized may find their federal tax compliance burden lightened, but this may not be the case for employers with offices in multiple jurisdictions with divergent marriage laws, Youn said.

A clear intersection between state and federal law exists in the area of employee health and welfare plans, Youn said. Many wholly insured health plan policies are approved by the insurance commissioner of a state, she explained. If a gay couple resides in a state recognizing same-sex marriage, then a fully insured policy should include same-sex spouses in the definition of spouse, she said.

"Clearly, many employees will have questions about the implications of the ruling," Youn said. "At this stage it may be best for employers to reassure employees that they're working hard to understand the decision and its implications," she said.

Youn agreed that positive employee relations could be an important factor in pursing retroactive refunds. "In terms of employee relations, there are intangibles in terms of what's required and what's not required" of employers, Youn said. "They're really going to have to think through what is required of them now," she said.

Prompt guidance with respect to the retroactive application of employer-provided retirement plans that include surviving spouse benefits is also needed, Youn said. While this would primarily be an issue under the Employee Retirement Income Security Act (ERISA), the subject also affects money purchase plans, Youn said.

Prior to the Windsor decision, such plans were only required to offer benefits to opposite-sex spouses; as a result of the case, those plans may now be required to offer the same benefits, including annuities upon the death of a participant, Youn noted. The plans may also now be required to provide pre-retirement annuities if a spouse dies while still employed, she added.

Employers need guidance on how to revisit the distribution of annuities, particularly if they have already begun paying out these benefits, Youn said.

"There's a lot of complexity here and the full implications of how this will play out for employees is not clear," Youn said.

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