A new blog post by Fred Reish (with help from some of his colleagues at Drinker Biddle) says it’s more complicated than you might think.
The blog post starts by acknowledging that “some plans are not subject to the Rule, and some arrangements that are not actually IRAs are treated as if they were IRAs and therefore subject to the Rule,” before turning to the point: how “plans” and “IRAs” are defined. The post includes a reprint of an article by Drinker Biddle attorneys Bruce Ashton, Elise Norcini and Josh Waldbeser on the subject.
Not Covered
Starting with the types of plans not covered by the fiduciary regulation, the blog post lists:
- Governmental plans – all types
- Payroll deduction only 403(b)s
- 457 plans – both 457(b) and 457(f)
- Non-qualified equity compensation, such as stock options and restricted stock units
- Non-electing church plans – all types
- Non-qualified deferred compensation plans
- Rabbi trusts
- 529 plans
- Uniform Gifts/Transfers to Minors Accounts
What is Covered
The authors explain that the fiduciary regulation does not affect arrangements that are neither plans nor IRAs. As for what plans are covered, the post notes that under the fiduciary regulation, covered plans include (1) all “plans” as ERISA defines the term, and (2) all plans that are tax-qualified under Section 401(a) of the Internal Revenue Code. The post notes that while many plan types fall under both categories, only one is required. For example, the post goes on to explain that 401(k) plans (benefiting employees of an employer) are both ERISA plans and qualified plans, as do profit-sharing plans, ESOPs and most money purchase and defined benefit plans (unless they fall into an excluded categories).
As for IRAs, those covered include all arrangements that are not “plans” under the above definition, but are treated as plans under the Code’s excise tax rules – which, the authors note, includes both “actual” IRAs and other similar arrangements like HSAs. Also, “payroll deduction only” IRAs are subject to the fiduciary regulation as IRAs, but are not plans.
At which point, it’s worth considering the plans covered by the fiduciary regulation – as plans:
- 401(k) plans – all types
- Individual (“solo”) 401(k)s
- 403(b) plans (other than governmental and non-electing church plans, and payroll deduction only 403(b)s)
- Profit-sharing plans
- ESOPs, including KSOPs
- Money purchase plans (other than governmental and non-electing church plans)
- Defined benefit plans (other than governmental and non-electing church plans)
- SEPs, including SARSEPs
- SIMPLEs
- Keogh plans
And those covered under the fiduciary regulation as IRAs:
- IRAs – all types
- Payroll deduction only IRAs
- Individual retirement annuities
- Health savings accounts (HSAs)
- Archer medical savings accounts (MSAs)
- Coverdell education savings accounts (ESAs)
Additional detail on these categories is available at http://fredreish.com/interesting-angles-on-the-dols-fiduciary-rule-59.
