Want to get your two cents in to the Feds about Open Multiple Employer Plans (Open MEPs)? The U.S. Department of Labor (DOL) says it is ready to listen.
When the DOL published its Final Rule last Monday to expand access to group retirement plans, some in the retirement plan industry were disappointed it did not include a provision for Open MEPs.
The Final Rule, which clarifies the circumstances under which an employer group or association or a professional employer organization (PEO) could sponsor a multiple employer plan (MEP), is scheduled to go into effect on Sept. 30.
But it can’t be forgotten that in connection with the Final Rule, the DOL also published a document seeking comments on whether to amend regulations to facilitate the sponsorship of Open MEPs.
The DOL said the Open MEPs request for information, which came from Preston Rutledge, Assistant Secretary, Employee Benefits Security Administration, stemmed from the approximately 60 comments it received in connection with the Final Rule. And, judging by what’s written in the request for information, those comments really are considered and can make a difference in rulemaking:
“After reviewing the comments, the Department is persuaded that Open MEPs deserve further consideration. The Department does not believe that it has acquired a sufficient public record on, or a thorough understanding of, the complete range of issues presented by the topic.
“In light of this and the conflict in the comments about whether and how to permit open MEPs, as well as legislation pending in the 116th Congress, the Department has decided to stimulate further debate and to further develop the public record by soliciting comments on a broad range of issues relating to Open MEPs…”
Strong support for Open MEPs
The request for information notes that more than half of the comments received addressed Open MEPs, and the majority were supportive of the Department promulgating a rule that would facilitate these arrangements.
Supporting commenters argued that Open MEPs would best promote the objectives of President Trump’s Aug. 31, 2018 Executive Order, “Strengthening Retirement Security in America,” and that Open MEPs are not precluded by ERISA.
The request for information states:
“They argued that the text of ERISA demonstrates that Open MEPs may be sponsored by ‘any person acting … indirectly in the interest of an employer, in relation to an employee benefit plan.’ They asserted that the Proposed Rule contained an unnecessarily narrow interpretation of ‘employer’ under section 3(5) of ERISA. They speculated that the narrow view in the Proposed Rule was likely influenced by the Department’s experience with abusive Multiple Employer Welfare Arrangement (MEWA) schemes in the past, but they aver that defined contribution MEPs are structurally different arrangements with fundamentally different regulatory ecosystems than MEWAs.”
But even among the supporters of open MEPs, the DOL notes there were very different ideas on how the Proposed Rule might best be amended to facilitate Open MEPs.
Some commenters, for example, recommended eliminating some or all of the substantial business purpose, control, and commonality requirements from the Proposed Rule’s bona fide group or association provisions, and the provision that prohibits financial services firms from being the group or association that establishes the MEP.
Other commenters recommended modifications to, and an expansion of, the Proposed Rule’s bona fide PEO provisions. These commenters argued that the bona fide PEO framework, with appropriate modifications, could readily be expanded beyond the narrow scope of PEOs to include commercial enterprises more generally.
To these commenters, a commercial entity’s willingness to exert substantial control over the functions and activities of the MEP, as the plan sponsor, plan administrator, and as a named fiduciary provides a sufficient basis to conclude that such an entity is acting “indirectly in the interest of an employer … in relation to an employee benefit plan” for purposes of section 3(5) of ERISA, without regard to whether the entity is a PEO.
The DOL notes not all commenters supported the idea of Open MEPs, raising issues regarding statutory authority and potential conflicts of interests among those businesses, entities, and other commercial ventures that most likely would be interested and willing to sponsor Open MEPs.
A few commenters viewed the topic of Open MEPs as perhaps being better suited for legislation, given the wide range of issues presented under ERISA and the Internal Revenue Code.
Open MEP comment topics
In the request for information, the Department is seeking comments on 18 specific questions regarding (as summarized by a Holland & Knight LLC brief):
- Open MEPs generally, including who should be able to sponsor them and how Open MEPs will comply with conflicts of interest and qualification rules
- Corporate MEPs or defined contribution plans that cover employees of employers related by some level of common ownership but that are not in the same controlled or affiliated service group of corporations
- The costs, benefits and likelihood of adoption of Open MEPs, and information about the demographics of such plans
The information received in response to the questions, the DOL says, “may form the basis of future rulemaking under ERISA.”
Comments in response to the request for information are due on or before Oct. 29, 2019. Written comments, identified by 1210-AB92, can be submitted to the Federal eRulemaking Portal at: http://www.regulations.gov.
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