As the election nears, 401(k) experts are keeping an eye on legislation that could make multiple employer plans (MEPs) an extremely favorable option.
MEPs have been around in some form since the 1960s, says Terry Power, president and CEO of The Platinum 401(k) Inc. A retirement plan established by one plan sponsor, a MEP can also be adopted by one or more participating employers. This vehicle transfers the fiduciary responsibilities and liabilities from employers to a MEP plan sponsor.
A closed MEP, explains Power, is where a nexus, or commonality, exists between the adopting companies (e.g., an association-sponsored plan exclusively for members). An open MEP has no nexus between adopters, although they might share a common payroll provider or geography.
Power became an “expert by proximity” — his practice was located in the Tampa Bay area, which in the mid-1980s was a veritable hotbed of employee leasing firms. By the early 2000s, these firms needed a professional employer organization (PEO) in order to use MEPs. His firm today is a third-party administrator for numerous MEPs.
“Initially, multiple employer plans gave companies leverage through economy of scale and service while mitigating fiduciary responsibility and requiring only one overall audit,” he says.
That all changed in 2012, when the Department of Labor (DOL) issued an opinion affecting open MEPs: If there was no commonality between employers — beyond a mutual administrative provider — the MEP would not be considered a single plan under ERISA. This meant that participating employers would have to file individual Forms 5500, conduct separate audits and adhere to other compliance requirements of individual plan sponsors.
Jason Grantz, QPA, AIFA, managing director/East for the Retirement Planning Consultant Group at Unified Trust Co., remembers this time clearly.
“Leading up to 2012, I was hearing about MEPs all the time,” he said. “Then, the letter came out.”
The conversation on MEPs turned silent, Grantz says.
“I don’t believe it was meant to be a ‘hammer’ by the DOL,” he says. “They were just accurately interpreting ERISA at the time.”
MEPs have picked up again, though, over the past two years, thanks to a bipartisan effort to loosen DOL restrictions. Read More…