Safe Harbor 401(k) Plans: Additional Windsor Implementation Guidance

On May 15, 2014, the Internal Revenue Service (“IRS”) issued Notice 2014-37, providing guidance concerning mid-year amendments to safe-harbor 401(k) and safe-harbor 401(m) plans reflecting the U.S. Supreme Court’s decision in United States v. Windsor, which invalidated Section 3 of the Defense of Marriage Act (“DOMA”). Notice 2014-37 follows the April release of Notice 2014-19, under which the IRS provided initial guidance on the effective dates and plan amendment deadlines for recognition of same-sex marriage by qualified retirement plans. Pursuant to Notice 2014-19, in order to maintain favorable tax status, qualified plans must begin recognizing same-sex marriages in operation effective June 26, 2013 (the date of the Windsor decision), and plans containing language prohibiting recognition of same-sex marriages (for example, a reference to DOMA) generally must be amended to comply with Windsor by December 31, 2014.

Safe-harbor plans under Internal Revenue Code (“Code”) section 401(k)(12) or (13) and safe-harbor 401(m) plans under Code section 401(m)(11) or (12) are generally prohibited from enacting amendments to be effective mid-year. Following the release of Notice 2014-19, the IRS was asked whether safe-harbor 401(k) or 401(m) plans would lose their safe-harbor status by executing a mid-year amendment to comply with Windsor. The IRS responded in Notice 2014-37 by confirming that a plan will not fail to be a safe-harbor plan under Code section 401(k)(12) or (13) or Code section 401(m)(11) or (12) merely because the plan sponsor adopts a mid-year amendment as required under Notice 2014-19 in order to comply with Windsor.

For more information on the impact of Windsor and the invalidation of Section 3 of DOMA on qualified plans, please see our series of articles in our July 2013 newsletter, and our August 2013 and April 2014 Special Alerts, or contact the Trucker Huss attorney with whom you normally work.