The Pension Protection Act Blog

Yesterday, in In re Marriage Cases, No. S147999 (May 15, 2008), the California Supreme Court addressed the issue of whether domestic partnership is the same as marriage. As framed by the Court, the issue they addressed in this decision is:

“Accordingly, the legal issue we must resolve is not whether it would be constitutionally permissible under the California Constitution for the state to limit marriage only to opposite-sex couples while denying same-sex couples any opportunity to enter into an official relationship with all or virtually all of the same substantive attributes, but rather whether our state Constitution prohibits the state from establishing a statutory scheme in which both opposite-sex and same-sex couples are granted the right to enter into an officially recognized family relationship that affords all of the significant legal rights and obligatinos traditionally associated under state law with the institution of marriage, but under which the union of an opposite-sex couple is officially designated a “marriage” whereas the union of a same-sex couple is officially designated a “domestic partnership.” The question we must address is whether, under these circumstances, the failure to designate the official relationship of same-sex couples as marriage violates the California Constitution.”

The Court provides an extensive discussion of this issue, and concludes that:

“Accordingly, in light of the conclusions we reach concerning the constitutional questions brought to us for resolution, we determine that the language of section 300 limiting the designation of marriage to a union “between a man and a woman” is unconstitutional and must be stricken from the statute, and that the remaining statutory language must be understood as making the designation of marriage available both to opposite-sex and same-sex couples. In addition, because the limitation of marriage to opposite-sex couples imposed by section 308.5 can have no constitutionally permissible effect in light of the constitutional conclusions set forth in this opinion, that provision cannot stand.”

It is the Court’s focus on the term “marriage” which is interesting from a qualified plan perspective. For as long as I can remember, a great debate has been waged over the plan language on “spouse” and “marriage” due to the federal pre-emption of issues involving ERISA. Marriage is one of those plan areas which is State regulated but has plan document implications because there is no federal pre-emption of marriage. It has remained a hybrid between the two worlds of federal pre-emption and State regulation for ERISA issues.

For example, qualified 401(k) plan documents will contain provisions about how a participant’s account balance will be distributed upon their death. Because it is possible, though unlikely, that a participant could die before receiving a full distribution of the vested portion of their account balance, the Internal Revenue Code contains a provision for a qualified preretirement survivor annuity (QPSA). A carefully drafted 401(k) plan will contain information incorporating this Internal Revenue Code provision regarding a QPSA, and may contain plan language something like this:

“Qualified Preretirement Survivor Annuity. Unless an optional form of benefit has been selected within the Election Period pursuant to a Qualified Election, the vested Account Balance of a Participant who dies before the Annuity Starting Date shall be applied toward the purchase of an annuity for the life of his surviving spouse (a QPSA). The surviving spouse may elect to have such annuity distributed within the 90-day period after the Participant’s death. For purposes of a QPSA, the term “spouse” means the current spouse or surviving spouse of a Participant, except that a former spouse will be treated as the spouse or surviving spouse (and a current spouse will not be treated as the spouse or surviving spouse) to the extent provided under a QDRO.”

While “spouse” in an integral part of the QPSA information for most plans, and plans normally contain an extensive definition section for terms used within the plan, the term “spouse” is a sticking point among pension geeks. One theory is that, since marriage, and therefore who is a spouse, is an integral part of several key components of the plan, the term should be defined in the definitions section of the plan document. A competing theory is that the plan document should sidestep the issue of who is a spouse by omitting the definition of spouse, since marriage, and therefore who is a spouse, is governed by State law, and qualified plan documents are required to comply with ERISA, which is federal.

One problem with including the definition of spouse within the plan document is that each State has its own laws when it comes to marriage and who is a spouse. Try to write a definition of spouse without using the term “marriage” or “married” and see how difficult it becomes. With the California Supreme Court focusing on what the term “marriage” means under California law, and with so many California employers sponsoring qualified plans, there will be a lot of pension geeks flipping through their plan documents this weekend to see how the plan addresses this issue.

Technorati Tags: Pension Protection Act, ppa, marriage, spouse, In re marriage cases, California Supreme Court, domestic partner, ERISA

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