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Key Tax Developments Affecting Retirees
Tax-Favored Employer Retirement Plans
(Continued from previous page)
Disregard of an Early Retirement that Lacks Substance. – Though a participant may be entitled
to a pension benefit upon early retirement, the IRS has ruled that it will disregard an arrangement
allowing a participant to "retire" and immediately thereafter resume employment. (Ltr. Rul.
201147038.) See Chapter 2 of the treatise.
Registered Domestic Partners and Same-Sex Spouses in Community Property States. – In a
few community property states, community rules are also available for same-sex spouses and
registered domestic partners. For those taxpayers, federal tax law generally treats their
community income as earned one-half by each partner or spouse.
Unfortunately, though, it is not entirely clear whether distributions from the qualified plans of such
taxpayers would be treated as community income or separate income. That is, the rationale for
preempting community property rules for opposite sex spouses is not quite so clear when
applied to same-sex spouses and registered domestic partners. (Ltr. Rul. 201021048; CCA
201021050; Boggs v. Boggs, 520 U.S. 833, 117 S. Ct. 1754, 138 L. Ed. 2d 45 (1997); IRS
Publication 555.) See Chapter 2 of the treatise.
Effect of Certain Life Annuity Elections on Spousal Annuity Requirements. – A qualified
retirement plan may be required to provide a participant’s surviving spouse with an annuity
payable over the spouse’s lifetime. However, the spousal annuity requirement generally does not
apply to a participant in a profit-sharing or stock bonus plan if (1) any nonforfeitable benefit
accrued at death is payable to the surviving spouse and (2) the participant has not elected a life
annuity. The IRS has now ruled that a revocable election to invest in a contract providing a life
annuity at retirement does not nullify this spousal annuity exception if ultimate annuity payments
are based on the account balance and actuarial assumptions at the annuity starting date.
However, given the emphasis in the ruling on the revocability of such an election, it seems likely
the IRS would deny the spousal annuity exception for this type of contract if the election were
irrevocable. (Rev. Rul. 2012-3, 2012-8 I.R.B. ___.) See Chapter 2 of the treatise for a discussion
of required spousal annuities.
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(Continued from previous page)
Disregard of an Early Retirement that Lacks Substance. – Though a participant may be entitled
to a pension benefit upon early retirement, the IRS has ruled that it will disregard an arrangement
allowing a participant to "retire" and immediately thereafter resume employment. (Ltr. Rul.
201147038.) See Chapter 2 of the treatise.
Registered Domestic Partners and Same-Sex Spouses in Community Property States. – In a
few community property states, community rules are also available for same-sex spouses and
registered domestic partners. For those taxpayers, federal tax law generally treats their
community income as earned one-half by each partner or spouse.
Unfortunately, though, it is not entirely clear whether distributions from the qualified plans of such
taxpayers would be treated as community income or separate income. That is, the rationale for
preempting community property rules for opposite sex spouses is not quite so clear when
applied to same-sex spouses and registered domestic partners. (Ltr. Rul. 201021048; CCA
201021050; Boggs v. Boggs, 520 U.S. 833, 117 S. Ct. 1754, 138 L. Ed. 2d 45 (1997); IRS
Publication 555.) See Chapter 2 of the treatise.
Effect of Certain Life Annuity Elections on Spousal Annuity Requirements. – A qualified
retirement plan may be required to provide a participant’s surviving spouse with an annuity
payable over the spouse’s lifetime. However, the spousal annuity requirement generally does not
apply to a participant in a profit-sharing or stock bonus plan if (1) any nonforfeitable benefit
accrued at death is payable to the surviving spouse and (2) the participant has not elected a life
annuity. The IRS has now ruled that a revocable election to invest in a contract providing a life
annuity at retirement does not nullify this spousal annuity exception if ultimate annuity payments
are based on the account balance and actuarial assumptions at the annuity starting date.
However, given the emphasis in the ruling on the revocability of such an election, it seems likely
the IRS would deny the spousal annuity exception for this type of contract if the election were
irrevocable. (Rev. Rul. 2012-3, 2012-8 I.R.B. ___.) See Chapter 2 of the treatise for a discussion
of required spousal annuities.
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covered. However, the information provided on this website is not a substitute for the advice of an attorney,
accountant, or other professional; and the author is not offering legal, accounting, or other professional
advice. The material presented on this website is not intended for use, and may not be used, to avoid tax
penalties. If you need legal advice or other professional help, you should seek (from an independent
attorney, accountant, or other competent professional) advice based on your own particular circumstances.
covered. However, the information provided on this website is not a substitute for the advice of an attorney,
accountant, or other professional; and the author is not offering legal, accounting, or other professional
advice. The material presented on this website is not intended for use, and may not be used, to avoid tax
penalties. If you need legal advice or other professional help, you should seek (from an independent
attorney, accountant, or other competent professional) advice based on your own particular circumstances.
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