The SPARK Institute on Thursday asked the departments of Labor and Treasury to issue regulations allowing defined contribution plans to determine a participant's marital status based on “state of celebration” — where people were married — rather than “state of domicile” — where married partners live.
The request, in a letter sent Thursday Aug. 15, is based on the recent U.S. Supreme Court ruling that declared a portion of the Defense of Marriage Act unconstitutional. Although the court overturned the federal law's provision that bars federal recognition of same-sex marriages, it didn't address the issue of different state laws on same-sex marriage, thus creating a dilemma for employers that have employees in many states.
“For plan sponsors, this is a very big issue,” said Larry Goldbrum, SPARK's general counsel, in an interview. “It's important that we get guidance quickly.”
Without regulatory clarity, participants will be confused, sponsors must deal with greater administrative burdens and uncertainty, and sponsors and providers could be subject to greater litigation risk, he added.
SPARK's calls echo those of other industry groups, such as the American Benefits Council and ERISA Industry Committee, for post-DOMA guidance and use of the state-of-celebration standard.
“It is vital that plan sponsors be able to follow a uniform rule in the administration of their plans for all of their employees,” said the SPARK letter signed by Mr. Goldbrum. “This is particularly important for employers that have employees in multiple states.”
Although uniformity isn't possible now “due to the differing laws among the states about same-sex marriages, some degree of uniformity and certainty can be achieved if plan sponsors are permitted to determine a participant's marital status based on the state of celebration,” the letter said.
SPARK also asked that regulations contain a “good faith compliance” provision, in which the departments of Treasury and Labor would exercise “a lenient enforcement approach that takes into account the complexity of the issues and challenges faced by plan sponsors and service providers as they await guidance,” according to the letter.
Based in Simsbury, Conn, the SPARK Institute represents service providers, investment managers, benefits consultants and third-party administrators.