Multiple Employer Plans Grabbing More Attention

A concerted effort in Washington to get more employers to offer retirement plans has raised the profile of multiple employer plans, a largely untapped market for institutional money managers and other service providers.

Unlike multi employer plans, which serve employers in a specific industry and are typically collectively bargained and managed, a multiple employer plan is adopted by two or more unrelated employers that do not want the administrative burdens and fiduciary responsibilities of sponsoring a plan themselves.

The three types of MEPs are those sponsored by a professional employer organization such as an employee leasing company, which can offer it to clients; by a trade group for its members; or “open” MEPs co-sponsored by employers with no business connection.

Some MEPs are several decades old, with the concept well established among professional organizations and associations as well as large corporations with numerous subsidiaries. It has not, however, taken off with small and midsize firms. That’s because there has been a lack of guidance or sometimes conflicting guidance from the Internal Revenue Service, which has authority over the tax status of retirement plans, and the Department of Labor, which enforces the participant protections of the Employee Retirement Income Security Act. The Labor Department has reservations about open MEPs in particular.

Now, with four legislative proposals making the rounds on Capitol Hill to help clear up the confusion and make it easier to form multiple plans, “it’s going to help conquer what I consider the last frontier,” said Edward Ferrigno, vice president for Washington affairs for the Plan Sponsor Council of America. Read More…

A Plan for Retirement

What is a qualified retirement plan?

A qualified retirement plan is a popular savings tool that millions of Americans use to help prepare for retirement.

An example of this is a 401(k) plan. Employees in this type of plan make pre-tax contributions to their retirement plan accounts through automatic deductions from their paychecks. Over time, savings may grow, helping you prepare for retirement. Your qualified retirement plan can provide you with a number of savings advantages, such as the potential for reduced taxes, the ability to take advantage of compound earnings and more.

And why is it important?

This plan has been set up by your employer. By participating in your company’s retirement plan, you’ll be able to take greater control of your financial future. You’ll also be able to take advantage of some attractive benefits the plan offers.

The potential to pay less in taxes

The more you contribute to your plan, the larger your retirement savings (and tax savings) may be.

Each 401(k) dollar you contribute to your retirement plan is taken from your paycheck before taxes are applied. This may lower your taxable income. It might even put you in a lower tax bracket.

The earnings on contributions to your plan grow tax-deferred until withdrawn. And since you may be in a lower tax bracket in retirement, you might pay less tax when the money is withdrawn than if you were taxed today.