For a family law attorney, the story is a familiar one. A married

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1 Reproduced by permission Colorado Bar Association 42 The Colorado Lawyer 77 (August 2013). All rights reserved. FAMILY LAW Benefits Issues Arise When Same-Sex Relationships End by Kristi Anderson Wells This article provides a general overview of the current state of the law on same-sex marriages and the Defense of Marriage Act, and examines the complex issues surrounding the division of benefits in the context of same-sex breakups. For a family law attorney, the story is a familiar one. A married couple has been together for more than twenty years, but the relationship is now over. They have a child, a dog, two cars, and a home they purchased and decorated together over the years. There are bank accounts and retirement plans to be divided. One or both parties are working, and somebody needs to pay for the child s health insurance. The breakup is hard for both parties, but they work through the issues and come out on the other side with two households, ready to move on with their lives. This is an everyday situation for most family law attorneys. However, when the two parties are the same sex, it is not business as usual when it comes to figuring out how benefits will be handled. This article discusses the benefits issues that arise during the breakup of a same-sex relationship. With the U.S. Supreme Court having ruled in June 2013 regarding the unconstitutionality of Section 3 of the federal Defense of Marriage Act (DOMA), 1 it is imperative that family law practitioners understand the issues and be prepared to address them. 2 On March 12, 2013, the Colorado Legislature approved the civil unions bill, 3 which provides that individuals in same sex unions are eligible to have their property, including retirement benefits, subject to equitable division under state law. For purposes of this article, the term same-sex partners refers to same-sex partners who are in a civil union recognized by the state of Colorado. The Dilemma According to a recent study by the Williams Institute, a prestig - ious gay legal think-tank, nearly 150,000 same-sex couples have either married or registered civil unions or domestic partnerships. 4 That number constitutes about one-fifth of the same-sex couples who acknowledged themselves as being in a same-sex relationship in the U.S. Census report. 5 Approximately 1% of the married or registered same-sex couples get divorced in any particular year. 6 This leads to a divorce rate of close to 50%. The recent passage of the civil unions statute in Colorado means that same-sex couples are eligible to divorce in this state. This means that a domestic practitioner likely will be faced with a samesex divorce in the very near future, if he or she has not already encountered one. Family law practitioners should be ready to analyze all individual plan documents to determine whether and how benefits under these provisions may be allocated in same-sex breakups in Colorado. Overview of the Law The majority of employee benefit plans are subject to federal law. For the most part, the benefits that family law attorneys deal with are subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA), 7 the Internal Revenue Code of 1986, as amended (Code), 8 or both. Under DOMA, the word marriage is defined for purposes of all federal laws as being a legal union between one man and one woman. 9 Similarly, under DOMA, the word spouse refers only to a person of the opposite sex who is a husband or a wife. 10 The law also permits states to refuse to recognize or give effect to samesex marriages recognized in other states. 11 On June 26, 2013, in a 5 4 decision, the U.S. Supreme Court struck down Section 3 of DOMA, defining marriages only as contracted between a man and a woman. 12 It did so on the basis that Coordinating Editors Patricia A. Cooper, Denver, of the Law Office of Stephen J. Harhai (303) , tcooper@harhai.com; Meredith Patrick Cord, Colorado Springs, of Johnson & Cord, PC (719) , mpc@johnsoncord.com About the Author Kristi Anderson Wells is special counsel at the law firm of Gutterman Griffiths PC, where she practices family law (303) , kwells@ ggfamilylaw.com. Family Law articles are sponsored by the CBA Family Law Section to provide information to family law practitio ners. Articles focus on practice tips and discussions of current issues within the realm of family law. The Colorado Lawyer August 2013 Vol. 42, No. 8 77

2 Section 3 of DOMA created a two-tiered marriage system where state-sanctioned same-sex marriages were denied validity under federal laws. Thus, couples whose relationships are recognized in their state as marriages now are provided the benefit of federal laws, including the protections of ERISA and the Code that apply to benefits. Currently, Colorado does not formalize or recognize same-sex marriages. 13 Civil unions are permitted effective May 1, The civil unions law authorizes any two unmarried adults, regardless of sex, to enter into a civil union. This law also provides that same-sex couples who are legally married in another state now have a recognized civil union in Colorado. Once in a recognized civil union, the parties are provided most of the rights, benefits, protections, duties, obligations, responsibilities, and other incidents under Colorado law that are granted or imposed on spouses in this state. The statute specifically states that, because Colorado income tax filings are tied to the federal income tax scheme, which does not currently recognize civil unions, the law does not permit parties to a civil union to file joint income tax returns. There does not appear to be anything in the U.S. Supreme Court s recent ruling that would address the constitutionality of Colorado s DOMA provision. In addition, the ruling does nothing to require the federal government to recognize Colorado civil unions as being equivalent to marriages. Thus, at least for now, there exists a two-tiered system in Colorado: the state recognizes state rights for same-sex relationships as civil unions, but denies those in same-sex relationships the status of marriage. By doing this, Colorado effectively denies those in same-sex relationships the benefits of marriage under federal statutes. In some cases, benefit plans are not governed by federal law. However, a blanket statement that plans that are not subject to ERISA are not subject to federal law oversimplifies the analysis. 15 Often, even plans that are not subject to ERISA or the Code will fall under some other federal statute, such as the Public Health Service Act, which may indirectly subject such plans to federal law. In those few cases where the domestic practitioner has determined that no federal law applies to a given benefit arrangement, he or she must look to state law and the plan document to determine whether recognition of the same-sex relationship is permitted. Thus, same-sex spouses in Colorado who previously were without the protection of the Uniform Dissolution of Marriage Act now are relieved of the specific problems that faced couples forced to turn to civil remedies for dividing joint property. The often expensive and unpredictable world of the partition action is now a thing of the past for same-sex spouses divorcing in Colorado. However, these same couples are still subject to disparate tax treatment at both the state and federal level. Basic Tax Concerns in Same-Sex Divorces In the context of opposite-sex marriages, family law practitio - ners are generally familiar with the basic tax rules. A transfer of property made incident to a decree of divorce or a decree of legal separation is not a taxable event. 16 A transfer is made incident to a divorce or a legal separation if it relates to the cessation of marriage. 17 A transfer relates to the cessation of marriage if it is made pursuant to a divorce or separation agreement as defined in Code 71(b)(2) and the transfer occurs not more than six years after the date on which the marriage ceases. 18 Code 71(b)(2) defines a divorce or separation instrument as: 1) a decree of divorce or separate maintenance or a written in - strument incident to such a decree; 2) a written separation agreement; or 3) a decree requiring a spouse to make payments for the support or maintenance of the other spouse. 19 In general, that means that in the context of traditional marriage, transfers made pursuant to a decree of divorce or legal separation are not taxable. Following the U.S. Supreme Court ruling on DOMA, this analysis also will apply to same-sex couples in statesanctioned marriages. That said, given that federal law does not recognize same-sex civil unions as a marriages, Code 1041 and 71 do not apply to same-sex civil unions. Therefore, in states that do not recognize same-sex marriages, the transfer of property incident to a same-sex divorce triggers a taxable event. 20 Retirement Plan Issues Many of the important benefits that are divided in dissolutions would not be divisible were it not for the fact that the parties are recognized as married. As noted above, in any retirement plan that is governed by ERISA or the Code, a person s marital status will be determined by reference to state law. State laws regarding the validity of marriage differ, with some states refusing to recognize marriage between parties of the same sex. Some of the retirement plan benefits and rules that differ based on the sex of the parties include: 1) qualified domestic relations orders (QDROs); 2) qualified joint and survivor annuities (QJSAs); 3) qualified pre-retirement survivor annuities (QPSAs); 4) spousal consent for hardship withdrawals or loans; 5) rollovers; 6) minimum required distributions (MRDs); and 7) incidental death benefits rule. Not all of these provisions will be important to the family law practitioner in the context of a same-sex breakup. However, practitio - ners should be familiar with the issues discussed below. QDROs For the family law practitioner, the QDRO is a necessary part of the practice and a potential malpractice risk. In the context of same-sex civil unions, it is even more dangerous. Under ERISA, plan benefits must be paid only to plan participants or their beneficiaries, unless there is a domestic relations order meeting the requirements of a QDRO that orders payment of child support, maintenance, or marital property to a spouse, former spouse, child, or other dependent of the participant. 21 Under federal law, a plan participant s same-sex partner is not recognized as a spouse unless the parties have a state-recognized marriage. Therefore, in Colorado, unless the same-sex partner qualifies as a dependent of the participant, a QDRO cannot be used to divide assets in a qualified retirement plan. To be considered a dependent of the plan participant, the same-sex partner must meet the requirements of Code 152: 1) the individual must have the same principal place of abode as the plan participant and must be a member of the participant s household for the entire year; 2) the individual s gross income must be less than $3,800 (for 2012); 78 The Colorado Lawyer August 2013 Vol. 42, No. 8

3 3) the participant must provide more than half of the individual s support; and 4) the individual must not be a qualifying child of any other individual. 22 The hurdles for a same-sex partner to qualify as a dependent of the plan participant are onerous. If a QDRO cannot be used to divide a defined benefit pension plan, the parties in a same-sex breakup are limited to (1) valuing the pension and having the participant buy out the nonparticipant spouse with other assets; or (2) waiting until the participant reaches retirement age and having the participant pay a portion of each pension distribution to the nonparticipant spouse. The former is preferable because it eliminates potential enforcement issues at retirement age and avoids forfeiture issues if the participant dies before receiving the benefit. If a QDRO cannot be used to divide a given 401(k) account balance, there are several options for dividing these assets during a same-sex breakup. First, assuming that the plan permits hardship distributions, the participant may take a distribution from the plan to pay a portion of the retirement account to the former partner. However, there are strict limitations on what constitutes a permissible hardship. 23 For example, a distribution will not be considered related to a hardship if the participant has other resources available to meet the need, including assets of the participant s minor children. Another option might be for the participant to take out a loan from the plan to buy out the nonparticipant partner. A loan from a 401(k) plan is not taxable if it meets certain criteria. However, even if loans are permitted by the plan, a participant may borrow only up to 50% of his or her vested account balance up to a maximum of $50, In addition, the loan must be repaid within five years. 25 These limitations may make taking a loan to buy out a former same-sex partner seem like a less-than-attractive option for the plan participant. Third, a participant who has reached age 59½ (or, in certain cases, age 55) may take a distribution from the plan without paying a penalty on the distribution. 26 The downside to this approach is that the paying partner has to receive the distribution into income, and the assets transferred to the recipient partner will be taxed as a gift. In addition, the recipient partner will receive assets outside a qualified retirement vehicle and the subsequent increase in the value of those assets will be taxable to the recipient. In all of the alternatives discussed above, absent a repeal of Colorado DOMA, there will be negative tax consequences on the transfer of the retirement assets from one same-sex partner to the other. The likely scenario is that each transfer will be taxed as a gift. Even if the law is changed to allow for same-sex marriages in Colorado, these negative tax consequences will continue to apply for samesex partners who are unmarried. QJSAs and QPSAs Defined benefit pension plans those that promise a certain benefit at retirement without regard to the amount of money that the participant has set aside are subject to rules under ERISA and the Code that require the default form of payment to be made in the form of a QJSA. 27 This form of benefit provides married people a monthly benefit for the lifetime of the participant and his or her spouse. The only way to avoid the QJSA requirement is for the participant s spouse to consent in writing to a different form of benefit. 28 The Colorado Lawyer August 2013 Vol. 42, No. 8 79

4 For an individual in a same-sex civil union in Colorado, federal law treats the plan participant as single. This has several ramifications. First, the default form of benefit in that case is the single life annuity (a monthly benefit only for the participant s lifetime). Second, there is no requirement that the nonparticipant partner consent to a form of benefit payment other than a single life annuity during the marriage. Therefore, the participant partner may elect any form of benefit payment that he or she wishes, including a form of benefit that completely excludes the nonparticipant partner, without seeking the advice or consent of the nonparticipant partner. If a plan sponsor so chooses, a qualified plan may be drafted to include language that permits a participant in a samesex civil union to elect a QJSA that benefits the nonparticipant spouse. Similarly, both ERISA and the Code require that defined benefit pension plans provide a QJSA to the spouse of a plan participant who dies before retirement. 29 This form of benefit provides a monthly benefit amount for the life of the surviving spouse. As with the QJSA, for an individual in a same-sex civil union in Colorado, federal law treats the plan participant as single, and the only way for a participant to opt out of this benefit is to obtain spousal consent. That consent is not required under federal law in the case of a same-sex civil union. 30 Also as with the QJSA, plan sponsors are permitted to include provisions in their plan that would extend this sort of benefit to partners in a same-sex civil union. There may be instances where the plan document permits a survivor benefit for same-sex partners; however, because there is no requirement that the same-sex partner consent, the participant partner may have named another beneficiary of the benefit without the knowledge of the nonparticipant partner. The continuing existence of the two-tiered system of marriages and civil unions in Colorado means that where the QJSA or the QPSA is extended to same-sex partners, there will be different federal tax implications for same-sex partners than would apply to spouses in state-sanctioned marriages. When dealing with the breakup of a same-sex civil union in Colorado, the family law practitioner must be sure to specifically address the form of benefit under the retirement plan and determine whether a survivor benefit is available under the plan terms for same-sex couples. The practitioner also should advise the client to seek advice regarding the potential tax impact of any form of division. Hardship Withdrawals and Loans A defined contribution plan participant must have spousal consent before taking a hardship withdrawal or loan from the plan. 31 Currently, the fact that same-sex marriages are not recognized in Colorado prevents a same-sex partner in a civil union from being afforded this federal protection. If Colorado DOMA is repealed, or if federal law is changed to recognize civil unions, federal spousal consent requirements will be extended to all validly married spouses and partners in civil unions, regardless of sex. As a result of the passage of the civil unions statute, same-sex partners in a civil union in Colorado will be afforded the protection of the Automatic Temporary Injunction found in the Uniform Dissolution of Marriage Act, which provides that on the filing of a Petition for Dissolution of Marriage or Legal Separation by the Petitioner, both parties are, among other things, restrained from transferring, encumbering, concealing, or in any way disposing of, without the consent of the other party or an order of the court, any marital property, except in the usual course of business or for the necessities of life without the consent of the other party. 32 Thus, a same-sex partner in a civil union now has some protection under state law against a plan participant transferring all the assets out of a 401(k) plan without the knowledge and consent of the other spouse during a breakup. Rollovers The rollover requirements applicable to qualified retirement plans exist under federal law and exclude same-sex partners in a civil union from the definition of spouse. However, as with the QPSA and QJSA provisions, an employer may amend its qualified retirement plan to permit non-spouse beneficiaries to roll over eligible distributions to an inherited IRA. 33 Under current law, if the participant s same-sex partner is the designated beneficiary of the employee, he or she may be able to receive a distribution from an eligible retirement plan via rollover after the participant dies. Rolling the distribution into an inherited IRA allows the same-sex partner to defer taxation on distributions by extending the distributions from the IRA over his or her lifetime, instead of being forced to receive a single lump-sum distribution. MRDs and Incidental Death Benefit Rule These provisions are not strictly applicable in the context of a same-sex breakup, but do illustrate how the current interplay of Colorado DOMA and federal law disparately impacts those in 80 The Colorado Lawyer August 2013 Vol. 42, No. 8

5 civil unions in Colorado. MRDs are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70½ years of age or, if later, the year in which he or she retires. If the plan does not distribute benefits to the participant s spouse starting on April 1 of the year following the year in which the participant retires (if later than age 70½), a penalty applies. 34 Under current law, a same-sex partner in a civil union is treated as a non-spouse beneficiary. As a result, all payments must be fully distributed to the same-sex partner within five years following the participant s death. 35 If the same-sex partner is the participant s designated beneficiary, payments may be paid over the life of the same-sex partner starting no later than one year following the participant s death. 36 The Code also contains the minimum distribution incidental death benefit rule. This rule precludes retirement plans from structuring benefits so that a significant portion of benefits are paid after the participant s death. 37 Where the participant s spouse is his or her sole beneficiary and distributions otherwise meet the minimum distribution requirements, this requirement is deemed to be satisfied. However, if the beneficiary is not the participant s statesanctioned spouse, this requirement is not satisfied unless the payments do not exceed a certain percentage based on the number of years that the participant s age exceeds the beneficiary s age. This percentage is outlined in a table in the regulations. 38 This is a complicated provision and beyond the scope of most separation agreements. The important thing for domestic practitioners to understand is that, as long as Colorado DOMA remains in place and there is no recognition of Colorado civil unions under federal law, the schedule of payments for a same-sex partner on the death of the participant will differ from the schedule of payments permitted for a traditional spouse. Health and Welfare Benefit Arrangements When dealing with health and welfare plans, family law practitioners should be aware that health plans generally are subject to federal law. This may confuse some practitioners who think that because certain health and welfare plans are insured and subject to state regulation, they are not creatures of federal law. The fact is that federal law touches almost all health and welfare arrangements through statutory schemes ranging from ERISA to the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (COBRA) 39 to the Health Insurance Portability and Accountability Act of 1996 (HIPAA). 40 Health and welfare plans were some of the first plans to extend benefits to domestic partners. As a result, some plans define the terms spouse or domestic partner in accordance with state law definitions and requirements; 41 some plans recognize registration with any state or local government; 42 and some plans, especially in states that do not recognize same-sex marriage or domestic partnerships, use their own internal affidavit of domestic partnership. 43 Where a plan has a specific provision permitting benefits to be provided to domestic partners, that provision likely will extend benefits to a same-sex partner in a civil union. As a result, a close reading of the plan provisions is essential in determining which benefits may be available to same-sex partners in the health and welfare arena. Taxation of Health and Welfare Benefits In the area of health benefits, there are three main sections of the Code at play: 105, 106, and 125. Section 105 provides that health benefits paid directly from an employer-sponsored plan do not trigger taxable income to employees, retirees, their spouses, or dependents. 44 Section 106 provides that employer-paid premiums for health benefits provided under an employer s plan are not taxable income to employees, retirees, their spouses, or dependents. 45 Employees may elect to pay medical premiums for health coverage of the employee and his or her spouse or dependents, on a pretax basis under a 125 cafeteria plan. 46 For purposes of these rules, the term dependent is defined by reference to Code 152, as de - scribed above. The interplay of Colorado DOMA and federal law does not permit the application of 105, 106, or 125 to a same-sex partner The Colorado Lawyer August 2013 Vol. 42, No. 8 81

6 in a Colorado civil union unless the partner can otherwise qualify as a dependent of the employee. As a result, all health benefits provided to same-sex partners in Colorado are taxable income to the employee, subject to withholding and employment taxes. 47 When determining the amount that is taxable to the employee with respect to health benefits provided to a same-sex partner, the IRS has determined that such benefits should be taxed according to the fair market value of the coverage: what the partner would have to pay for such coverage in the individual insurance market. 48 The Private Letter Rulings on this subject indicate that the excess of the fair market value of the coverage actually provided to the same-sex partner over the amount paid by the employee for such coverage (through premiums) will be included in the gross income of the employee. Under one interpretation of these rulings, the provision of health benefits to a same-sex partner could be prohibitively expensive if the same-sex partner incurs large medical bills that are paid by the plan. For example, if Susie covers Molly under her company s health plan and Molly incurs $200,000 in medical expenses due to her fight with cancer, one possible interpretation of the IRS rulings would result in $200,000 less the amount paid by Susie for the premiums applicable to Molly s coverage being included in Susie s gross income. Many practitioners have argued that a more reasonable interpretation of the IRS rulings would be to include the cost of COBRA continuation coverage under the plan in the employee s gross income. This would result in up to 102% of the actual premium cost of the insurance for Molly being included in Susie s gross income. Note that if Susie and Molly live in Massachusetts instead of Colorado and their relationship is a state-sanctioned marriage, these amounts would not be included in Susie s gross income under the provisions of the Code cited above. For state tax purposes, the domestic practitioner will have to look to individual state laws to determine whether same-sex health and welfare benefits are taxable. COBRA Under COBRA, 49 group health plans covering twenty or more employees must provide continuation coverage to Qualifying Beneficiaries employees, spouses, and dependent children on the occurrence of a qualifying event. The term qualifying event includes, for spouses, the occurrence of a divorce or legal separation from the covered employee. In preparing to dissolve traditional marriages, domestic practitioners often include reference to COBRA in the separation agreement, because it provides a former spouse three years of continuation coverage under a group health plan following divorce or legal separation. Under the current interplay of federal law and Colorado DOMA, COBRA does not include same-sex partners in a civil union in the definition of qualifying beneficiaries, and therefore does not extend coverage for same-sex partners in Colorado. That said, many states, including Colorado, have passed statelevel continuation coverage laws known as mini-cobras. 50 These laws expand continuation rights to those working in smaller companies (usually with two to nineteen employees). It appears that, under the language of the civil union statute, Colorado s mini- COBRA will extend to same-sex partners in a civil union on divorce. Similarly, California s mini-cobra provides thirty-six months of continuation coverage to same-sex spouses of employees covered under fully insured health plans and HMOs covering two to nineteen employees. 51 Continuation coverage in California also extends to employees of large employers who have exhausted their federal COBRA coverage. As a result, the domestic practitioner should analyze the law of the particular state where the employee resides when determining whether continuation coverage will be available to a nonemployee spouse in a same-sex breakup. HIPAA Special Enrollment Rights Under HIPAA, 52 special health plan enrollment rights are available to a plan participant s spouses and dependents. 53 These rights allow eligible individuals to enroll in the plan outside a health plan s annual open enrollment period. While Colorado DOMA continues in effect, it limits these rights where the individual at issue is a same-sex partner in a civil union. However, a same-sex partner who qualifies as the plan participant s dependent also may be entitled to these rights. Cafeteria Plans Code 125 cafeteria plans are primarily governed by federal law. The sole purpose of a cafeteria plan is for employers to provide certain benefits to employees on a pre-tax basis. The application of the Code to these plans is affected by Colorado DOMA as well. As a result, none of the benefits provided under a cafeteria plan is available to same-sex partners in Colorado. This is one of the few areas where employers do not have the flexibility to adopt more liberal provisions. 82 The Colorado Lawyer August 2013 Vol. 42, No. 8

7 What this means for purposes of taxation is that unless a samesex partner qualifies as a dependent of the participating employee, all benefits will be provided after-tax to the partner. The term dependent for purposes of the healthcare reimbursement accounts and pre-tax payment of insurance premiums under a cafeteria plan is the Code 152 definition. 54 Obamacare For the most part, the Patient Protection and Affordable Care Act (frequently referred to as Obamacare), which President Barack Obama signed into law on March 23, 2010, 55 did not directly address the issues faced by same-sex partners. However, in June 2010, President Obama issued a memorandum to the heads of Executive Departments and Agencies mandating that Agencies should take action to extend benefits to the same-sex domestic partners of federal employees and their children. 56 This mandate has been embodied in a set of proposed regulations that were issued by the U.S. Office of Personnel Management on July 20, The proposed regulations extended the provision allowing children to stay on their parents health plans until age 26 to the children of same-sex partners of federal workers. With the Supreme Court s recent repeal of Section 3 of DOMA, it appears that the Office of Personnel Management will be able to extend federal benefits to same-sex partners and their dependents provided that they are in state-sanctioned marriages. Conclusion Even before the recent U.S. Supreme Court decision striking down Section 3 of DOMA, in February 2011, the Obama Ad - ministration announced that the Department of Justice would no longer defend federal DOMA in court. This appears to be the trend. Section 2 of federal DOMA remains unaffected by the U.S. Supreme Court decision. This provision allows states to refuse to recognize same-sex marriages performed under the laws of other states. While Section 2 still stands, Colorado can continue to refuse to recognize the same-sex marriages formalized in other states, transforming the status of couples who come to Colorado into civil unions by operation of law. It is unclear what if any effect this will have on federal recognition of state-sanctioned same-sex marriages where a couple relocates to Colorado after their marriage is formalized in another state. However, it is an issue that likely will have to be addressed in short order. If Section 2 of DOMA falls on constitutional grounds, there will be a cascading effect as states move to comply with the change in federal law. That may result in a repeal of Colorado DOMA, as well. In the meantime, family law practitioners should recognize that same-sex couples dividing employee benefits in Colorado continue to receive disparate treatment under federal law. This disparate treatment will be ongoing in Colorado until the state constitution is amended to repeal Colorado s DOMA provision, or until federal law is changed to recognize state-sanctioned civil unions in the same manner as state-sanctioned marriages. Even if the law changes, there likely will be a lengthy period while benefit plan sponsors wait for guidance on how to revise their benefit plans to conform to changes in the law. At this point, the recent passage of the civil unions law in Colorado and the U.S. Supreme Court s decision regarding federal DOMA do little to affect the tax analysis related to dividing benefits in a same-sex breakup in Colorado. As a result, it is important that family law practitioners consider the following questions: Is this the breakup of a marriage or a civil union or the breakup of an informal partnership? Did the marriage occur in a jurisdiction that recognizes samesex marriage or civil unions? Is DOMA still in effect? Is the benefit plan subject to ERISA or the Code? Is the benefit plan subject even indirectly to another federal law? How is the term spouse defined by the benefit plan? Analyzing the answers to each of these questions will assist the family law practitioner when drafting separation agreements and when advising clients regarding their rights and the potential tax ramifications of dividing benefits in a same-sex breakup. Notes 1. The Defense of Marriage Act, Pub. L , 110 Stat (1996). 2. United States v. Windsor, 570 U.S. (2013) (holding that Section 3 of the federal Defense of Marriage Act is unconstitutional). 3. S , 69th Gen. Assem., Reg. Sess. (Colo. 2013); CRS Badgett and Herman, Patterns of Relationship Recognition by Same-Sex Couples in the United States (The Williams Institute, Nov. 2011), available at williamsinstitute.law.ucla.edu/wp-content/uploads/ Badgett-Herman-Marriage-Dissolution-Nov-2011.pdf. 5. Id. 6. Id. 7. Employee Retirement Income Security Act of 1974 (ERISA), 29 USC 1001 to IRC 1 to The Defense of Marriage Act, Pub. L. No , 110 Stat (1996). 10. Id. 11. Id. Currently, the following U.S. jurisdictions limit marriage to relationships between a man and a woman: Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, and Wyoming. The following U.S. jurisdictions issue marriage licenses to same-sex couples: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, Washington, and the District of Columbia. The following jurisdictions allow civil unions, providing statelevel rights to same-sex couples: Colorado, Delaware, Hawaii, Illinois, New Jersey, and Rhode Island. The following jurisdictions grant nearly all state-level spousal rights to unmarried couples (domestic partnerships): California, Nevada, Oregon, and Washington. The following jurisdictions provide some state-level spousal rights to unmarried couples (domestic partnerships): Hawaii, Maine, Wisconsin, and the District of Columbia. The following jurisdictions recognize designated beneficiary arrangements: Colorado and Hawaii. National Conference of State Legislatures, Defining Marriage: Defense of Marriage Acts and Same-Sex Marriage Laws (Nov. 2012), available at ices/same-sex-marriage-overview.aspx. 12. United States v. Windsor, 570 U.S. (2013). 13. The Colorado Constitution was amended in 2006 to state that Only a union of one man and one woman shall be valid or recognized as a marriage in this state. Colo. Const. art. II, 31. The civil union bill was passed in March 2013 and was signed by the governor. SB , 69th Gen. Assem., Reg. Sess. (Colo. 2013). 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8 14. SB , 69th Gen. Assem., Reg. Sess. (Colo. 2013); CRS There are some exceptions. For example, church plans and governmental plans are not subject to ERISA. IRC 414(d) and (e). 16. IRC 1041(a). 17. Temp. Treas. Reg T, Q&A (6) (2012). 18. Temp. Treas. Reg T, Q&A (7) (2012). 19. Id. 20. IRC 61(a)(1) USC 206(d)(3)(k); IRC 414(p)(8); U.S. Department of Labor Advisory Opinion A (2001). 22. IRC Treas. Reg (k)-1(d)(3)(i) (2012). Note that hardship distributions may be made under 403(b) and 457(b) plans, as well, assuming that the terms of the plan permit them. 24. IRC 72(p). 25. Id. 26. IRC 72(t)(2)(A)(i). A participant may be able to commence distributions without penalty at age 55 if the participant was age 55 or older at the time of retirement. IRC 72(t)(2)(A)(v). 27. IRC 401(a)(11); 29 USC IRC 417(a)(2). 29. Id. 30. IRC 417(a)(4). 31. IRC 411(a)(11). No spousal consent is required if the distribution amount would be under $5,000. Treas. Reg (a) (2012). 32. CRS IRC 402(c)(11). 34. IRC 401(a)(9). 35. IRC 401(a)(9)(ii). 36. IRC 401(a)(9)(iii). 37. IRC 401(a)(9). 38. Treas. Reg (a)(9)-6, Q&A(2)(c)(2) (2012). 39. The Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L , 100 Stat. 82 (1985). 40. The Health Insurance Portability and Accountability Act of 1996 (HIPAA), Pub. L , 110 Stat (1996). 41. E.g., California, Maine, New Jersey, Oregon, and Washington, among others. 42. E.g., State of California, City of Berkeley, or City of San Francisco. 43. This practice has largely fallen out of favor because it raises questions of discrimination unless all plan participants are required to sign an affidavit regarding the status of their relationships. 44. IRC IRC IRC IRS Private Letter Ruling (Sept. 10, 1998); Rev. Rul , C.B IRS Private Letter Ruling (Feb. 23, 2001); IRS Private Letter Ruling (Sept. 16, 2005); IRS Private Letter Ruling (Sept. 26, 2003), IRS Private Letter Ruling ( Jan. 19, 1996); IRS Private Letter Ruling (May 7, 1992). 49. IRC 4980(B); 29 USC 601 to Colorado s mini-cobra statute is CRS Cal. Health & Safety Code (2012); Cal. Ins. Code (2012); Cal. Health & Safety Code (2012); Cal. Ins. Code (2012). 52. HIPAA, supra note USC 701(f)(2). 54. IRC 105(b) and Patient Protection and Affordable Care Act, Pub. L. No , 124 Stat. 119 (2012). 56. The White House, Office of the Press Secretary, Presidential Memorandum, Extension of Benefits to Same-Sex Domestic Partners of Federal Employees ( June 2, 2010), available at n 84 The Colorado Lawyer August 2013 Vol. 42, No. 8