Now that President Trump has announced an executive order to encourage the use of multiple employer plans (MEP) among small businesses, the expectation is that the Retirement Enhancement and Savings Act of 2018 (RESA) will soon be signed into law.
While Vestwell believes strongly in the spirit of the bill and what it’s trying to accomplish—making good retirement plans affordable and accessible to companies of all sizes—the bill fails to solve many retirement plan challenges.
Small businesses haven’t historically embraced 401ks out of concerns for fiduciary liability exposure, litigation, fees, and administrative burdens, among others.
RESA turns to MEPs as a solution because MEPs allow small employers to pool together to share expenses. The belief is that small businesses will be more likely to offer retirement plans once they can offload some fiduciary responsibility and enjoy traditionally “large plan” costs.
Unfortunately, shortcomings within the bill have led to missed opportunities and confusion, and center on:
Fiduciary responsibility
While the bill states that fiduciary responsibility can be offloaded, some would argue that is already the case today with a 3(38) offering.
It is unclear whether the new bill would offload liability of all responsibilities—such as the responsibility of the plan sponsor to select an un-conflicted provider—but doing so would require a re-write of ERISA laws rather than just a notation in a new provision.
In addition, it is not clear who (if not the plan sponsor) is responsible for protecting the plan against conflicts of interest, prohibited transactions, and other such obligations.
Lead participant employer role
What exactly is the role of the lead participant employer? How do they get selected and evaluated? Are they compensated and, if so, how much and who decides? And how does insurance account for this unique role?
Without a clear outline of the lead participant role, it is hard to envision the way companies decide to, and continue to, work together.
General retirement plan shortcomings
Unfortunately, a “fairer” cost doesn’t give plan sponsors a better understanding of what they’re getting with a retirement plan. In many cases, fees are buried, service offerings unclear, and administrative burdens cumbersome. The bill does not address any of these challenges.
The good news is, options exist to better support small plan sponsors even without RESA. The advent of tech-forward retirement platforms brings solutions to the issues of cost, fiduciary responsibility, administrative burden, and transparency.
They also address many of the challenges of RESA. Because a modern-day retirement platform doesn’t require the pooling of resources, a plan sponsor can enjoy custom plan designs and pricing, tailored to its workforce, rather than having to compromise based off the collective needs of the MEP.
And since technology automates many expensive processes, plan sponsors are afforded economies of scale comparable to (if not better than) what a MEP would bring.
As a result, a company can benefit from the personalization, strong customer service, competitive pricing, fiduciary oversight, and transparency that all plan sponsors and participants deserve.
So, while it is our mission to support the healthy retirement of all Americans, we want to ensure they don’t just have access to a plan, but that they have access to the right one.
Allison Brecher, general counsel with Vestwell, has over 15 years of legal and regulatory experience, handling high profile and complex litigation involving employee benefits, ERISA, regulatory matters, data privacy and electronic discovery. She can be reached at allison.brecher@vestwell.com.
Allison Brecher is the general counsel of Vestwell, a digital retirement platform that streamlines administration and management of retirement plans.
