Last year, President Trump signed an executive order directing the Departments of Labor and Treasury to consider changes to make it easier for businesses to join together to offer Multiple Employer Plans (MEPs), which the order refers to as Association Retirement Plans. In keeping with that directive, on July 29, the DOL made public its final rule on the plans, to take effect Sept. 30, 2019.

The DOL altered the definition of “employer” under ERISA to allow 401(k) or similar defined contribution plans to be offered by existing organizations such as local chambers of commerce or associations formed to administer MEPs, or professional employer organizations.

The intent is to reach the 38 million private-sector employees without access to retirement plans through their employer by creating incentives and greater economies of scale for small businesses. However, as the rule explains, “MEPs’ scale efficiencies may not always exceed the scale efficiencies from other providers of bundled financial services used by small employers that sponsor separate plans…MEPs, unlike large single-employer plans, must themselves incur some cost to distribute retirement plans to large numbers of small businesses.” 

The rule coincides with consideration of the “Retirement Enhancement and Savings Act” (RESA) in Congress. The provisions from RESA eliminating regulatory barriers and allowing MEPs to adopt IRA-based plans were also contained in the “Setting Every Community Up for Retirement Enhance Act,” as reported in News & Views in May. However, unlike the legislative proposals, the DOL final rule does not include open MEPs by unrelated employers. The DOL instead issued a request for information on open MEPs due Oct. 29, 2019.

Heather Eilers-Bowser is Big “I” federal government affairs counsel.