“We see some interesting movement in Washington surrounding MEPs. Fill us in about what’s happening.”
Pete Swisher was happy to accommodate from the GRP Advisor Alliance’s annual summit, providing an update on multiple employer plans and where they stand with legislators and regulators.
“The advent of professional employer organizations (PEOs) in 2002 led to the rise MEPs,” Swisher, senior vice president and national sales director with Pentegra Retirement Services, said. “This in turn led to a gold rush over the next 10 years, where everyone liked the idea of MEPs and got into the business.”
That was, until the Department of Labor threw “cold water all over them” with the regulatory release of advisory opinion 2012-04A, which detailed a single plan for ERISA purposes.
“When I was a kid and playing poker, I would make these big raises (which was 50 cents at the time),” he added by way of context. “People would ask me why I would do it and I would say, ‘It clears the kids off the streets.’ That’s what happened with 2012-04A. It left only a handful of players who really understood the rules and felt comfortable operating in the space.”
Between 2012 and today, there have been a dozen bipartisan bills, he claimed, with one receiving a 26 to zero vote in the finance committee.
“It was a freight train; everyone expected the bill to pass, but it was attached to another bill that bailed out a union pension fund.”
Republicans balked, wanting the pension fund to go through the PBGC, as a bailout opened a precedent for a teamster union pension fund bailout of over $1 billion and potentially many more that are currently dealing with the $4 trillion in the country’s underfunded liabilities. If the PBGC were to happen, union members would lose some of the assets, something to which Democrats were unwilling to agree.
“Since those bills are linked, who knows if it will go through,” Swisher concluded. “Before November, it was a freight train, now it’s a different story and the children feel safe enough to be back on the streets again. It will take the industry a few years to stand back up, but those of us doing this for a long time are perfectly comfortable with nothing happening. We like the confusion. It’s good for us.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
