The Internal Revenue Service and Treasury have weighed in on how they will deal with excise taxes and prohibited transaction exemptions as the Labor Department reassesses the applicability date of the fiduciary regulation.
In Announcement 2017-4, the IRS announced its decision to provide relief “from certain excise taxes under § 4975 of the Internal Revenue Code (Code), and any related reporting requirements,” to conform to the temporary enforcement policy announced by the Department of Labor (DOL) in Field Assistance Bulletin (FAB) 2017-01, as well related prohibited transaction exemptions, including:
- the Best Interest Contract Exemption (BIC Exemption);
- the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs (Principal Transactions Exemption); and
- certain amended prohibited transaction exemptions (collectively, PTEs).
In making the announcement, the IRS noted that, “because the Code and ERISA contemplate consistency in the enforcement of the prohibited transaction rules by the IRS and the DOL, as further reflected in and facilitated by the statutory Reorganization Plan, the Treasury Department and the IRS have determined that it is appropriate to adopt a temporary excise tax non-applicability policy that conforms with the DOL’s temporary enforcement policy described in FAB 2017-01.” Accordingly, the IRS said it would not apply § 4975 and related reporting obligations with respect to any transaction or agreement to which the DOL’s temporary enforcement policy, or other subsequent related enforcement guidance, would apply.
