When the American Retirement Association reported last week that the Department of Labor had recently submitted a “final rule” to the Office of Management and Budget pertaining to “Savings Arrangements Established by States for Non-Governmental Employee”, it raised an inquisitive eyebrow.
There are questions surrounding the various structures associated with state sponsored retirement plan schemes for private sector employees that this proposed rule will likely address. The questions range from state sponsorship of retirement plans with a marketplace approach, to prototype plan formats, and – a topic close to my heart – multiple employer plans.
There has been a well deserved outcry from the private sector retirement plan community about the need for us to be able to compete with these new state-sponsored plans on a level playing field. The proposed state-sponsored “open multiple employer plan” format contains pretty much all of the features that we would like to see made available under private sector plan rules.
This format should be expanded to the private sector 413(c) multiple employer plans as well.
We anticipate that the submitted rule changes will include the elimination of a “nexus” or “commonality” among adopters, elimination of the “one bad apple rule” that could – in theory – disqualify a multiple employer plan due to the actions of a rogue adopter, allow for one global Form 5500 (with only one plan-wide annual plan audit) regardless of the number of adopters, and a few other upgrades that were somewhat restricted back in 2012 via a DOL Advisory Opinion. No one knows for certain what’s in the rule at this point. It’s anyone’s guess.
The 2017 U.S. Budget, as proposed by the Obama administration, contains $100,000,000 to allow for the expansion of multiple employer plans in an effort to broaden retirement plan coverage and simplify the duties and liability on employers who wish to offer a retirement plan to their employees.
The timing of the actions by the DOL not only ties in with the upcoming effective dates of some of the state programs, but they also may be preparing to set in motion the expansion of multiple employer plans as a private sector solution for the small to mid-market retirement plan sectors at the same time.
It would make sense for the Department of Labor to level the playing field by addressing some of the restrictive issues that currently hinder the rapid expansion of retirement plan coverage under a broader multiple employer plan availability. It would also tie in nicely with the wishes of the Obama administration and a bipartisan Congress to expand these programs before the upcoming election.
Maybe things are about to fall into place. We’ll know exactly what the new rules state no later than the end of October.