Relief from excise taxes to conform with fiduciary rule | KPMG United States
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Relief from excise taxes to comply with DOL's temporary enforcement

Relief from excise taxes to comply with DOL

The IRS today released an advance version of Announcement 2017-04 that provides relief from certain excise taxes under section 4975 of the Internal Revenue Code, and any related reporting requirements, to conform to the temporary enforcement policy described by the Department of Labor (DOL) with respect to the final fiduciary duty rule and related prohibited transaction exemptions, and certain amended prohibited transaction exemptions.


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Read Announcement 2017-04 [PDF 20 KB]


On April 8, 2016, the Department of Labor published a final regulation defining who is a “fiduciary” of an employee benefit plan under § 3(21)(A)(ii) of ERISA as a result of giving investment advice to a plan or its participants or beneficiaries. The final rule also applies to the definition of a “fiduciary” of a plan under § 4975(e)(3)(B) of the Code. The final rule treats persons who provide investment advice or recommendations for a fee or other compensation with respect to assets of a plan as fiduciaries in a wider array of advice relationships than was true of the prior regulatory definition. Read TaxNewsFlash-United States

The Department of Labor also published the prohibited transaction exemptions, which provide two new administrative class exemptions from the prohibited transaction provisions of ERISA and the Code, as well as amendments to previously granted exemptions. The prohibited transaction exemptions would allow, subject to appropriate safeguards, certain broker-dealers, insurance agents, and others that act as investment advice fiduciaries, as defined under the final rule, to continue to receive a variety of forms of compensation that would otherwise violate prohibited transaction rules, triggering excise taxes and civil liability.

The final fiduciary duty rule became effective on June 7, 2016, and has an applicability date of April 10, 2017.

On February 3, 2017, the President directed the Secretary of Labor to have the Department of Labor examine the impact of these fiduciary rules.  On March 2, 2017, the Department of Labor published a notice seeking comments on a proposed 60-day delay of the April 10 applicability date, as well as comments on other issues.  On March 10, 2017, the Department of Labor issued FAB 2017-10 to announce a temporary enforcement policy related to its proposal to extend for 60 days the applicability date of the fiduciary duty rule.

Transition relief

Because the Code and ERISA contemplate consistency in the enforcement of the prohibited transaction rules by the IRS and the Department of Labor, 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 Department of Labor’s temporary enforcement policy. Accordingly, the IRS will not apply § 4975 and related reporting obligations with respect to any transaction or agreement to which the Department of Labor’s temporary enforcement policy, or other subsequent related enforcement guidance, would apply.

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