On Monday, the U.S. Department of Labor announced a new rule that will make it easier for small businesses to offer retirement savings plans to their workers through Association Retirement Plans (ARPs).
ARPs would allow small businesses to band together to share the administrative burden that can sometimes act as a barrier to implementation of employer-sponsored defined contribution plans.
More commonly known within the industry as multiple employer plans (MEP), the rule comes a little less than a year after President Trump issued his executive order to expand retirement plan access.
“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,” Acting Secretary of Labor Patrick Pizzella said in a statement. “Association Retirement Plans offer valuable retirement security to small businesses’ employees through their retirement years.”
Approximately 38 million private-sector employees in the United States do not have access to a retirement savings plan through their employers, according to Department of Labor statistics.
Under the rule, ARPs could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide.
“The rule is interesting for a couple of reasons,” Pete Swisher, Senior Vice President and National Sales Director with Pentegra Retirement Services, said from the floor of the Outcomes Conference 2019 in Denver on Monday when news of the rule broke. “One of them being the association health plan regulations that were linked to these rules were overturned in the D.C. Circuit.”
There was “speculation” about what the DOL was going to do as a result, Swisher added. Would they rewrite the regs, file for an appeal or withdraw and hold off and maybe come back at it later? And there were 11 states where the attorneys general filed a lawsuit against association health plans, which they won.
“It seemed as though this was a venue that took the side of the plaintiffs and said these rules are unreasonable and needed to be overturned,” Swisher said. “But the Trump administration had announced its intention to help make large plan benefits more available to small companies. He did it with health care and then did it with retirement. He said he wanted to see progress within a year, and now we’re seeing those signs of progress. Rather than let the D.C. circuit lawsuit hold them up, they posted the final regs for association retirement plans.”
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.