Same-Sex Marriage OK Might Impact Nonprofit Pensions

June 26, 2015       Mark Hrywna and Patrick Sullivan      

The U.S. Supreme Court today ruled 5-4 that same-sex marriage is constitutional, which would extend legalized same-sex marriage to 13 states that still do not recognize it. At issue in Obergefell v. Hodges was whether the Fourteenth Amendment required states to recognize same-sex marriages that were licensed and performed in other states.

“It’s a big day for freedom, and I am so grateful to all of the people who made this possible,” Tim Gill, founder of the Denver, Colo.-based Gill Foundation said via a statement. “Today’s victory is not a happy accident. We made it happen together through years of focused execution of the plan to win. Gill said supporters of the ruling should “celebrate today’s decision, and then get right back to work.” He cited protections at the federal level as a top priority for the future. “LGBT people can be fired, denied housing, or refused service at a business simply because of who they are or who they love,” he said.

Gregory Lewis, executive director of True Colors Fund in New York City, never thought the issue could advance so much in the 15 years he’s been an advocate, from same-sex marriage having next to no public support to it now being the law of the land.

“Today the Supreme Court lived up to what this country was founded on: Equality for all,” he said. “Now, in particular, the LGBT youth are one step closer to growing up in a world where they can be their true selves and be truly equal.”

Brian S. Brown, president of the National Organization for Marriage (NOM), called today’s decision illegitimate, “nothing but judicial activism, legislating from the bench,” and “contravenes the decisions of over 50 million voters.” He drew comparisons to previous court rulings, such as Dred Scott v. Sandford (1857) and Roe v. Wade (1973).

Brown pledged that the organization would work to reverse the decision. “The U.S. Supreme Court does not have the authority to redefine something it did not create. Marriage was created long before the United States and our constitution came into existence. Our constitution says nothing about marriage. The majority who issued today’s ruling have simply made it up out of thin air with no constitutional authority,” he said in a statement. “Today’s decision is by no means the final word concerning the definition of marriage; indeed it is only the beginning of the next phase in the struggle,” said Brown, proposing a constitutional amendment defining marriage in the law as the union between one man and one woman.

The court’s 5-4 decision in U.S. v. Windsor (2013) struck down a section of the Defense of Marriage Act (DOMA), which defined marriage for federal purposes as being a legal union only between a man and a woman. That ruling potentially had an effect on how nonprofits administer their 403(b) plans.

Many plan documents though don’t get that specific and do not define the word “spouse,” according to Harry Atlas, a partner and employee benefits lawyer at Venable, LLP in Baltimore, Md. Still, he suggested that it’s not a bad idea for nonprofits to add language acknowledging the 2013 Supreme Court decision. If terms of your nonprofit’s plan are consistent with the decision in U.S. v Windsor — defining a spouse as a spouse under federal law – it likely doesn’t have to be amended, according to Atlas. However, if the plan defines a spouse as “the opposite-sex spouse of a participant,” it would have to be amended to comply with the court’s decision. Plans that include gender specific definitions of marriage or spouse must be amended to treat same-sex marriages as equal to opposite-sex marriages.

Operationally, nonprofits should make sure their plan is operating in accordance with the Supreme Court decision, to the extent that there are plan provisions that afford rights to certain types of spouses – if they were a same-sex marriage, it would have to comply and provide for same-sex status rights.

Many 403(b)s have a requirement of married couples, if the plan is paid in a lump sum, to have spousal consent, Atlas said. In states where same-sex marriage is recognized, the plan afforded consent to the same-sex spouse, he said. If a nonprofit’s plan requires spousal consent to pay in lump sum – as most 403(b)s do – and the plan didn’t get consent but paid a lump sump to a participant without consent of a same-sex partner, that same-sex partner could have a claim due to not getting consent. Usually, written consent provided by the spouse of a retirement account owner, for the retirement account owner to take certain actions with the account, such as naming someone other than or in addition to spouse as primary beneficiary; making certain distributions from a pension plan; taking loans from a plan, etc.