Under the Pension Protection Act, signed into law on August 17, 2006, non-spouse beneficiaries can rollover retirement benefits to their partners. Non-spouse couples are also allowed to draw from a retirement fund in case of an emergency of the beneficiary.
What does the Pension Protection Act mean for glbt couples?
Previously, even though many companies allow same-sex partner beneficiaries, in the event of death the surviving partner (and other non legally married beneficiaries) were forced to withdraw the entire benefit sum- resulting in severe early withdrawal tax penalties. The taxable sum also bumped the beneficiary into a higher tax bracket.
Now, non-legal beneficiaries (including same-sex partners) can transfer his or her deceased partner's retirement funds into an IRA account and either draw down the benefits over a five-year period, or over his or her own life expectancy.
Under the Hardship Distribution rules, individuals who list their same-sex partners as beneficiaries under a 401(k) plan can now withdraw monies from their retirement fund in case of the partner's medical or financial emergencies.
Previously, employees could only utilize their 401(k) funds for the emergencies of legally recognized spouses and dependents.
Is your partner covered?
In order to benefit from the Pension Protection Act, make sure your partner is designated as the beneficiary on your benefits and 401(k) packages. Contact your human resources or benefits specialist to adjust your information.