Update on Nevada Trust Company Proposed Regulation Affecting Third Party Administrators of Retirement Plans

By Brian H. Graff
Executive Director/CEO
American Society of Pension Professionals and Actuaries (ASPPA.org)
March 19, 2009

We at ASPPA are pleased to inform you that the Nevada Financial Institutions Division, Department of Business & Industry, has issued proposed legislation (SB 310) amending the Nevada Trust Company Statute (view the entire proposal at http://www.leg.state.nv.us/75th2009/Bills/SB/SB310.pdf) with a much narrower definition of the term "administrator." This legislation was issued to replace a proposed regulation issued last fall. As reported in earlier communications, the original proposed regulation (read with the statute), would have required ERISA-covered retirement plan administrators and recordkeepers providing retirement plan services in Nevada to be licensed as a trust company, even though they do not act as custodian of plan assets or as a fiduciary.

The new proposed legislation contains a much narrower definition of the term "administrator" as it relates to the Nevada Trust Company Statute. Instead, only those Nevada IRA providers holding themselves out to the public as a service provider, holding or maintaining ownership in the servicing rights of IRAs, or possessing or controlling any assets of IRAs would be subject to the Nevada trust company requirements. Specifically, the new legislation provides:

"As used in this section, "administrator" includes servicers or administrators of individual retirement accounts within the meaning of section 408(a) of the Internal Revenue Code of 1986, 26 U.S.C. § 408(a), where the servicer or administrator holds itself out to the public for performance of such services and holds or maintains an ownership interest in the servicing rights of such accounts, or possesses or controls any of the assets of such accounts, including cash."

Consequently, the proposed legislation will no longer require qualified retirement plan administrators and recordkeepers providing services in Nevada to be licensed as a trust company, and we have confirmed that with George Burns, the Commissioner of Financial Institutions.

As background, in January and February of 2009, ASPPA representatives held several face-to-face meetings and other communications with various Nevada lawmakers, where we presented a group letter signed by approximately 200 Nevada plan sponsors and service providers opposing the proposed regulation. The group letter and subsequent communications proved to be extremely effective in convincing the regulators that the proposed regulation/legislation should not apply to those retirement plan service providers already subject to ERISA.