Now that the federal Defense of Marriage Act has been invalidated, some same-gender surviving spouses are asking retirement plan sponsors to take a second look at their previously denied eligibility for a death benefit. A favorable court ruling in a newly filed case could further complicate beneficiary matters for plan sponsors.
The case was recently filed in the U.S. District Court for the District of Connecticut — Gerald V. Passaro II v. Bayer Corp. Pension Plan — by a same-gender surviving spouse denied a benefit under the Bayer plan. The plan adopted DOMA’s definition of spouse. So although the couple was legally married in the state of Connecticut, the marriage was not recognized for purposes of the plan. (Bayer Corp. is the North American subsidiary of health and agricultural science company Bayer AG of Germany.)
Under qualified retirement plans, countless challenges arise from identifying the beneficiary entitled to receive a participant’s benefit in the event of a death. These challenges range from incapacity and divorce, coupled with failure to update beneficiary information and common law spouses, to simultaneous death of a participant and his beneficiary to designations not properly accompanied by required spousal consent. If, as requested in the Passaro case, giving a retroactive review for same-gender marriage benefits becomes required of plan sponsors, this list of challenges will increase.
Background
Connecticut enacted a law permitting same-gender marriages on Nov. 12, 2008, and Gerald Passaro married a former Bayer employee, Thomas Buckholz, on Nov. 26, 2008. Buckholz worked for Bayer for more than 20 years, and was fully vested in the company’s retirement plan when he passed away in January 2009. Although the plan required the DOMA definition of spouse, Buckholz listed Passaro as his beneficiary and spouse with the Bayer plan.
According to plan benefit calculation statements, Buckholz was entitled to a single life annuity monthly benefit of $1,169.01 on the first day of the month following his 65th birthday. The normal form of benefit for a married participant would be a 50-percent joint and survivor annuity, with a benefit of $510.80 per month to his spousal beneficiary. At the time of the participant’s death in January 2009, the Bayer plan did not recognize same-gender marriages; therefore, when Passaro requested a surviving-spouse benefit from the Bayer plan, his request was denied. He then used the plan’s claim and appeal procedures, but the claim was denied by the plan’s ERISA Review Committee.
In November 2010, Passaro brought suit in district court challenging DOMA’s constitutionality, and in July 2012, the court held that DOMA violated the equal-protection principles in the Fifth Amendment of the U.S. Constitution. When DOMA was invalidated by the U.S. Supreme Court with its U.S. v. Windsor ruling on June 26, 2013, Passaro again requested a surviving-spouse benefit, was denied one and brought this action.
Administrators are required to apply the plan terms when making benefit determinations, and in the event of a death, they must follow terms in effect on the participant’s date of death.
After DOMA was invalidated, the retirement plans community anxiously awaited federal agency guidance to see if a retroactive mandate would be issued for same-gender spouses’ benefits, but one was not.
This means that the Passaro case challenges the effective date of IRS guidance to plan sponsors to recognize same-gender couples’ marriages as of June 26, 2013. A plaintiff win in this case would mean the effective date of DOMA invalidation for the Bayer plan would be retroactive to January 2009, and may cause any determinations made while DOMA was valid for similarly situated plans to be challenged. This would further complicate beneficiary determinations for a surviving same-gender spouse, if the participant died before the Windsor decision was handed down.
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