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Beneficiaries

Same-Sex Marriage Ruling Impacts Benefit Plans (Again)

On Friday, June 26, 2015, the Supreme Court published its ruling in Obergefell v. Hodges, holding (by a 5 to 4 margin) that the Fourteenth Amendment requires a state to license marriages between two people of the same sex, and to recognize any such marriage that is lawfully licensed and performed out-of-state. As a result, all (remaining) state laws or constitutional amendments banning same-sex marriage are now invalid.

Fiscal Cliff Legislation Includes Expansion of In-Plan Roth Conversions

The American Taxpayer Relief Act of 2012 (i.e., the fiscal cliff legislation) includes an amendment to the Tax Code that expands the availability of “in-plan Roth conversions.” Since 2010, 401(k) plans, 403(b) plans, and governmental 457(b) plans have had the option of allowing participants to convert certain pre-tax amounts held in the plan to after-tax Roth amounts (in a taxable “in-plan” rollover transaction). However, such “in-plan Roth conversions” were limited to amounts that were otherwise distributable under the tax laws. The new legislation removes the requirement that amounts must be “distributable” before they can be converted. As a result, plans that include a Roth contribution feature may (but are not required to) allow participants to convert any pre-tax amounts held under the plan (whether attributable to employee deferrals, employer contributions or rollover contributions) to after-tax Roth amounts in a taxable “in-plan” Roth conversion, regardless of whether the participant has attained age 59½.

Losing by Winning: Case Offers Harsh Reminder Concerning Preventable Expenses

The recent decision in Herring v. Campbell offers an object lesson in unnecessary exposure to administrative burdens and legal fees.  Because the plan document failed to say whether stepchildren would be considered “children” (for purposes of a retirement plan’s default beneficiary provision), the plan administrator and plan sponsor were caught between two feuding groups of potential beneficiaries.

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