It’s been a busy week at the Department of Labor—especially with issues related to the retirement savings of American workers.
Fresh on the heels of Thursday’s bombshell announcement that it will introduce a new version its controversial fiduciary rule, the DOL released a “Notice of Proposed Rulemaking to help small businesses strengthen retirement security in America” on Monday.
The proposed rule would make it easier to offer multiple employer plans (MEP), which the DOL refers to as Association Retirement Plans, allowing small businesses to band together to offer 401k plans to employees.
“President Donald J. Trump is moving to expand quality, affordable workplace retirement plan options for America’s small businesses and their employees,” Labor Secretary Alexander Acosta said in a statement. “Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans. Association Retirement Plans give these employers a simple and less burdensome way to offer valuable retirement benefits to their employees. The proposed rule helps working Americans—and their families—to take care of themselves in their retirement years.”
Decrying a “lack of affordability” and regulatory barriers keeping many small businesses from offering retirement plans to their workers, President Trump signed an executive order in late August easing the way for the use of MEPs.
Largely seen as a bipartisan issue, the department notes enhancing workplace retirement savings is critical to the financial security of America’s workers.
Approximately 38 million private-sector employees in the United States do not have access to a retirement savings plan through their employers. Association Retirement Plans offer these workers, and their families, enhanced savings opportunities.
Under the proposed rule, Association Retirement Plans could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide.
Sole proprietors, as well as their families, would also be permitted to join such plans.
In addition to association sponsors, the plans could also be sponsored through Professional Employer Organizations (PEO).
A PEO is a human-resource company that contractually assumes certain employment responsibilities for its client employers.
By expressly permitting these new plan arrangements, the proposal would enable small businesses to offer benefit packages comparable to those offered by large employers.
The department expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses’ hand when negotiating with financial institutions and other service providers.