Compliance December 7, 2017

IRS Issues 2017 Required Amendments List

The 2017 RA List is light on items.

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The Internal Revenue Service (IRS) issued Notice 2017-72 containing the required amendments list for 2017 (2017 RA List).

In Revenue Procedure 2016-37 the agency eliminated, as of January 1, 2017, the five-year remedial amendment cycle system for individually designed plans, and also provided that the Department of the Treasury and the IRS intend to publish annually an RA List.

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The agency notes that an RA List does not include guidance issued or legislation enacted after the list has been prepared and also does not include:

  • Statutory changes in qualification requirements for which the Treasury Department and the IRS expect to issue guidance (which would be included on an RA List issued in a future year);
  • Changes in qualification requirements that permit (but do not require) optional plan provisions (in contrast to changes in the qualification requirements that cause existing plan provisions, which may include optional plan provisions previously adopted, to become disqualifying provisions); or
  • Changes in the tax laws affecting qualified plans that do not change the qualification requirements under Section 401(a) of the Employee Retirement Income Security Act (ERISA) (such as changes to the tax treatment of plan distributions, or changes to the funding requirements for qualified plans).

The 2017 RA List is light on items. It is divided into two parts. Part A covers changes in qualification requirements that generally would require an amendment to most plans or to most plans of the type affected by the change. Listed under Part A are final regulations regarding cash balance/hybrid plans and benefit restrictions for certain defined benefit (DB) plans that are eligible cooperative plans or eligible charity plans described in section 104 of the Pension Protection Act (PPA).

Part B includes changes in qualification requirements that the Treasury Department and the IRS anticipate will not require amendments to most plans, but might require an amendment because of an unusual plan provision in a particular plan. The list only mentions final regulations regarding partial annuity distribution options for DB plans.
Client Service December 7, 2017

DOL Rule Provides Tailwind for Adoption of Outsourced Fiduciary Services

For the $5 million to $500 million DC plan market, advisers and consultants offering 3(38) discretionary investment advice are more common.

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The Department of Labor (DOL) conflict of interest rule provides a tailwind for the adoption of outsourced fiduciary services in the defined contribution (DC) plan market, according to the latest research from Cerulli Associates.

“Today, it can be difficult to have a DC-related conversation without someone using the terms ‘3(21)’ or ‘3(38),’ which have become DC industry shorthand for nondiscretionary versus discretionary advice,” states Jessica Sclafani, associate director at Cerulli. “Because of the growing awareness of the role and responsibilities of a fiduciary—among plan sponsors and their intermediaries—there is more attention being paid to fiduciary service providers that will act in an ERISA [Employee Retirement Income Security Act] 3(21) or ERISA 3(38) capacity relative to a DC plan’s fund lineup.”

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There is a spectrum of fiduciary services offered to DC plans, according to Cerulli. “Baked in” 3(21) and 3(38) fiduciary services embedded in the recordkeeper platform are more common to plans with less than $5 million in assets. “Baked in” refers to when a recordkeeper will engage a provider to conduct further due diligence on the investment options available on a given platform to generate a narrowed list of funds for which the provider will serve as an ERISA 3(21) or ERISA 3(38) co-fiduciary. Providers are typically Envestnet, Mesirow, Morningstar and Wilshire, and products are typically off-the-shelf with a low-touch service model.

For the $5 million to $500 million DC plan market, advisers and consultants offering 3(38) discretionary investment advice are more common. Providers are typically retirement specialist advisers and consultants as well as boutique DC conultants, using a medium-touch service model.

For DC plans with greater than $500 million in assets, the OCIO model is most common, using full customization built for specific plans. These are high-touch service models delivered by Tier-1 investment consultants, such as Callan, Mercer, NEPC and Willis Towers Watson, to name a few.

Information about purchasing the report, U.S. Retirement Markets 2017: The Rise of Fiduciary Services, is available here.

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