Pension law extends protection to gay couples
Two provisions that extend financial protections to same-sex couples were cemented into law yesterday when President George W Bush signed The Federal Pension Protection Act, eliminating obstacles and penalties that non-traditional families face when the need to withdraw from pension funds arises.
“For gay couples and all Americans with non-spouse beneficiaries, death and taxes weren’t only certain, but also times of great and unequal financial difficulty,” said Human Rights Campaign President Joe Solmonese.
“In a challenging political climate, we persevered and helped to secure critical federal protections that will make difficult times for domestic partners a little easier.”
According to the language of the legislation, the first provision allows the transfer of an individual’s retirement plan benefits to a domestic partner or other non-spouse beneficiary (sibling, parent, child, etc.,) when the pension holder dies.
The surviving partner (or other non-spouse beneficiary) will now be able to transfer his or her deceased partner’s retirement funds into an Individual Retirement Account (IRA) and either draw down the benefits over a five-year period, or over his or her own life expectancy.
In the past, surviving same-sex partners or other non-spouse beneficiaries in similar situations were typically forced to withdraw the entire amount as a lump sum and incur immediate tax charges.
In addition, this action often bumped the survivor into a higher tax bracket because the withdrawal was counted as taxable income to the beneficiary.
The second provision, which addresses retirement plan hardship distributions, allows gay couples (and others with non-spouse, non-dependent beneficiaries- siblings, parents, children, etc.,) similar access to laws that permit people to draw on their retirement funds in the case of a qualifying medical or financial emergency.
In the past, the federal law covered only the spouses or dependents of employees when it came to accessing retirement funds during an emergency.
“This bill provides much needed support for non-spousal beneficiaries and will have meaningful impact,” said David Ratcliffe, National co-leader of Merrill Lynch’s LGBT Professional Network, and Director of the firm’s Centre for Philanthropy and Nonprofit Management.
“Specifically, passing these provisions means that when families are at their most vulnerable, they will have new options under the law that should alleviate some of the stresses that come in to play with the loss of a loved one.”
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