In the wake of the U.S. Department of Labor’s highly anticipated final rule on ARPs taking effect last Sept. 30, we’ve now heard about the official launch of an Association Retirement Plan being made available to businesses that are members of a chamber of commerce in Connecticut.
Southington Chamber of Commerce President Barbara Coleman-Hekeler this week announced that the central Connecticut-based chamber would act as a closed multiple employer plan (MEP) sponsor and enrollment is now open for its new Association Retirement Plan. The plan is believed to be one of, if not the first in the nation to be enacted as a result of the DOL rule allowing businesses to enter into association retirement plans unrelated by geography or industry.
The idea of pooling small 401k plans is intended to encourage more small business owners to offer 401k plans to employees by making it easier and more economical to provide them.
“By joining together through the Southington Chamber 401k plan, members will be able to tap into group pricing that will save the business and their employees time and money,” Coleman-Hekeler said, adding that the chamber is “very excited” about taking a national leadership role in Association Retirement Plans.
“Another benefit of the Southington Chamber ARP is that members that utilize the plan do not need to worry about many of the administrative duties, such as individual IRS 5500 filings, as these functions will be handled on behalf of employers by the association,” said Lucia Chubet, Chamber Treasurer and Partner in the CPA firm Daigle, Smith & Chubet.
In addition to providing a valuable benefit for members, the new ARP also provides the Southington Chamber of Commerce with a new incentive for non-member businesses to join, as only chamber member businesses can enroll in the plan. The Southington Chamber of Commerce is one of the largest and most active standalone Chambers in Southern New England, with over 300 businesses and organizations as members.
“Our membership is always looking for a return on their dues investment,” said Charlie Cocuzza, Chamber Board Chairman and President of Omega Solutions. “The Chamber MEP 401k Plan examples the mission of the chamber to help businesses grow and keep quality employees.”
Local advisor shows the way
The plan will be managed by Northshire Consulting, a Southington-based registered investment advisory firm specializing in creating tailored strategies. Coleman-Hekeler has been working on creating the new ARP with Brian Williams, President of Northshire Consulting, since last July when she took the reigns as the Chambers’ new leader.
“We are delighted to roll this program out with Southington resident and Executive Member Brian Williams at Northshire Consulting,” Coleman-Hekeler said. “With his 20 years in the industry and focus on the retirement plan market, we are proud that he has so quickly become a national thought leader on these programs following the 2019 DOL ruling.”
Williams deflected credit back to Coleman-Hekeler for jumping on the ARP bandwagon right out of the gate. “This ruling came out as she was just settling into her role. It’s not always the easiest topic to wrap your head around, but she took a careful note and asked a lot of great questions,” Williams said. “It would have been very easy for the Southington Chamber to sit back and be a follower on this opportunity; I admire and respect my local chamber for taking a national leadership position.”
Williams noted that Coleman-Hekeler prioritized establishing a robust MEP to help provide high-quality retirement plan choices. “I’m very pleased that the Southington Chamber of Commerce made the financial wellness of the employees of their member businesses a priority,” Williams added.
“We firmly believe this program will be the cornerstone to a Chamber-led financial wellness program that member employers will be able to easily tap into and offer their employees,” Coleman-Hekeler said.
Williams told local news organization the Record-Journal that a business with 25 employees and $2 million in assets could save about $6,000 annually by joining the chamber’s ARP, and that managing a retirement plan can take between 50 to 70 hours per year for employers.
He added that the first employees taking part in the program will be those of the chamber itself, and that as employees of other chamber member companies join, the cost savings could increase. Working owners without employees, including sole proprietors, can also participate.
Williams said he’s already talked to businesses in the area that want to either switch from their current plan administrators or start a 401k for their employees by joining the chamber’s ARP.
“We’ve had some pretty good interest,” Williams told the Record-Journal. “The plan sells itself.”
The road to here
The move toward MEPs got rolling back on Aug. 31, 2018 when President Trump signed a well-publicized executive order about strengthening retirement security in America, directing the federal government to expand access to workplace retirement plans for American workers through a new “MEP rule.”
The executive order directed officials at the departments of Labor and Treasury to revise or eliminate rules and regulations that impose unnecessary costs and burdens on businesses, especially small businesses, and that hinder formation of workplace retirement plans.
That call to action prompted the retirement industry to begin devising strategies and product ideas in expectation of receiving new guidance from Washington about MEPs.
The DOL was first to move, publishing proposed regulations on association retirement plans (“Closed” MEPs) on Oct. 23, 2018. After a comment period, the final rule was published in the July 31, 2019 Federal Register, and took effect on Sept. 30.
The final rule makes it clear that an ARP can now cover employers not just in the same industry as before, but in the same geographic area, such as a common state, city, county, or a metropolitan area (even if it crosses state lines). In addition to association sponsors, the plans can also be sponsored through Professional Employer Organizations (PEOs). A PEO is a human-resource company that contractually assumes certain employment responsibilities for its client employers. PEOs that already offered employee benefit plans to their client employers now have clear standards.
By expressly permitting these new plan arrangements, the DOL rule enables small businesses to offer benefit packages comparable to those offered by large employers.
Then of course in late December Congress passed the SECURE Act, signed into law by President Trump, which included a key provision that opened up MEPs to small companies that don’t share a common nexus, as was previously required.
The provision also protects small employers who join Open MEPs from penalties if other members violate fiduciary rules, also known as the “one bad apple” liability risk that a non-conforming member can pose to an entire plan. That issue has long been a stumbling block for MEPs.