Church plan and definition of Spouse

[30Rock]

Can a non ERISA steeple church 403b plan use a definition of spouse that does not reflect the Windsor amendment to DOMA? So can a church plan define Spouse to mean a person of the opposite sex to whom the participant is married, but then state that for RMD purposes, Spouse reflects the changes to DOMA as of June 26, 2013? The document to be used is a pre-approved plan that does not define Spouse in this manner, and we would have to write this definition into the plan, which could take it out of pre-approved status which I guess is the second issue. First issue is the legality of using this definition in a church plan.

 

Thank you!

[Peter Gulia]

If a plan is a church plan (as ERISA § 3(33) defines it) and has not elected to be governed by ERISA, ERISA § 205 does not apply.

 

For an IRC § 403(b) plan, providing a qualified joint and survivor annuity, a qualified preretirement survivor annuity, or a death benefit absent a spouse’s consent is not a condition for Federal income tax treatment as a § 403(b) plan.

 

If a church plan provides a benefit that varies on the existence or non-existence of a spouse, a plan may (within constraints set by other tax-law conditions) provide the church’s or the plan’s definition of spouse.  For benefits other than those stated to meet a tax-treatment condition (such as an IRC § 401(a)(9) provision), a church plan may define a spouse more narrowly, or more widely, than U.S. Federal and State laws define who is or isn’t a spouse.

 

A church might want its lawyer’s advice not only about the question described above but also about many other points for which a church plan may (and a church might prefer to) depart from other retirement plans’ norms.

 

Likewise, a church might want its lawyer’s advice about a church plan’s provisions (if any) about alienations to benefit a nonparticipant other than the participant’s death-benefit beneficiary.  A plan not governed by ERISA does not enjoy ERISA’s preemption of States’ laws.  A church plan might be vulnerable to some courts’ orders, including some that not only depart from the QDRO norm but also command a payment or set-aside that the plan does not provide and is beyond the kinds and forms the plan provides.

 

Some other opportunities include governing-law provisions; exclusive-venue provisions; use of plan and church claims procedures, and internal dispute-resolution procedures; and restrictions on which persons are authorized to accept service of process.  Further, some provisions relate to exercise-of-religion rights under the Federal and States’ constitutions.

 

[jpod]

Since this is a 403(b) plan I assume that there is no extra employer-provided death benefit in play here.  Can the participant name his/her same-sex spouse as the designated beneficiary?  If so, what's the point?  I suspect I know what the "point" may be, but it doesn't make much sense to me even with all due respect to 1st Amendment rights.   

[CuseFan]

1 hour ago, jpod said:

 Can the participant name his/her same-sex spouse as the designated beneficiary? 

Certainly and, as you note, that would make the issue moot. However, not everyone is so diligent about making/updating beneficiary designations, in which case the default death benefit payment to a spouse becomes problematic unless the plan clearly defines, either contrary to or in agreement with Federal law/Windsor decision. And there may be other spousal rights in the plan, likely more than legally necessary for a church plan because of the pre-approved plan language.

[jpod]

You say "certainly," but I'm not so certain.  There would be nothing to prevent the plan from prohibiting the designation of death beneficiaries and instead to require that there be a mandatory priority of death beneficiaries (e.g., to the opposite-sex spouse, if there is one, next to the participant's issue per stirpes, next to the estate).  In that way the employer guarantees that the plan will never pay anything to a same-sex spouse. Given the question asked in the first place, I wouldn't be surprised if this was also part of the employer's mindset.

[Peter Gulia]

jpod's and CuseFan's observations are among the many possibilities.

Even without a subsidized death benefit or subsidized survivor annuity, some church plans provide a survivor annuity or impose a spouse's-consent condition even if nothing in public law calls for it.  And in setting such a condition a church might choose its private-law meaning of spouse.

Also, a church plan's definition of a spouse might not always be about discriminating against same-sex spouses; a plan might recognize spouses more widely than public law does.

 

[jpod]

I was playing the cards we were dealt by 30Rock, not another hand.

[Peter Gulia]

jpod, you're right that 30Rock's query and its assumed facts suggest a likelihood that the church plan's desired provision might have little practical impact, and so might be mostly about the church expressing a policy or belief.

 

[jpod]

I think it could have a very significant practical impact.  Absent a state law problem, or some new application of Title VII, they could write the plan as I described so that the plan would never be in a situation of having to pay something to a surviving same-sex spouse.  I would not be surprised if that's what they want.  On the other hand, they are likely to find out about the marriage and fire the participant while he/she is alive, again barring state law or Title VII problems, thereby rendering the point moot.     

[30Rock]

Well here is what I have. No QJSA or other death benefit other than the account balance.  And the intent via administrative forms is that the spouse consent to the election of a non-spouse beneficiary. We can certainly require spousal consent to name a non-spouse beneficiary in our new church document but the issue is to use the DOMA definition of spouse does not comply with our pre-approved document unless the document vendor concedes that we can enter this information into a Describe line and it will not affect the pre-approved status of the plan. And the impact on the plan itself would be - 1. what if the participant does not complete a beneficiary form - the default says it is payable to children if any then estate. What if the same sex spouse sues? And 2. what if the participant intentionally names someone other than the same sex spouse as beneficiary and there will be no need for a waiver because his spouse is not recognized as a spouse. So participant dies and same sex spouse finds out he named someone else, can he sue? I just want to see all angles to see if the plan is at risk. Maybe a church plan cannot be sued on these grounds as long as the plan is clear? Church vs state vs federal law, does Church win?

[Peter Gulia]

Your questions about risks illustrate some reasons why a church might want its lawyer's advice about governing-law provisions; exclusive-venue provisions; use of plan and church claims procedures, and internal dispute-resolution procedures; and restrictions on which persons are authorized to accept service of process.

 

[30Rock]

I agree thank you!