Noting the confusion in the retirement plan industry in general surrounding the MEP, Swisher, senior vice president and national sales director with Pentegra Retirement Services, sought to dispel common misconceptions, which extended to a definition of what MEPs actually are (and what they are not).
“A multiple employer plan is a single retirement plan for both ERISA and tax code purposes, in which more than one unrelated employer can participate,” he noted. “It’s treated as one plan for both ERISA and IRC purposes, and that’s what we refer to as a closed MEP. It meets the DOLs stringent requirements for what constitutes a single plan, one that has a limited application, but a very useful application, except that it’s not broadly applicable.”
A much more useful and broadly applicable structure is what’s called an open MEP, but in this instance, advisors should be careful with their use of the term ‘MEP.’
“Clearly, for Department of Labor purposes it is not a single plan under ERISA and therefore they would not call it a multiple employer plan. For that reason, I think it is sensible to use the term multiple employer program, but having said that even an open MEP can be operated under a single document.”
However, just because the DOL doesn’t consider it a single plan doesn’t mean it can’t deliver the benefits of operating it under a single document and single plan authority, he added.
We’re glad he’s clearing up the confusion.
Largely seen as an opportunity to pool resources to get more employees covered in retirement plans, interest in the possibilities and implications are attracting the attention of worker, employers and Congress, with hearing recently held on the open MEP concept.
“I was actually on the phone earlier today with a consulting firm that was doing research for a client,” Swisher said. “The bottom line is that there is a rapidly growing groundswell of not only interest in this topic, but it is now transitioning to action. Advisors are implementing programs, they’re putting together multiple employer arrangements for a variety of clients.”
Larger TPA shops, especially, are examining their books of business and concluding that they need to streamline, simplify and leverage their books to become more efficient with smaller plans.
Multiple employer plans are one of the structures “they seem to want in the mix.”
“It’s gone from this cool idea with everybody just sort of waiting for somebody to tell them what to do, to now people who are acting on them. It’s a structurally superior delivery vehicle from the client’s perspective. They don’t want someone to help them with the complexity of an ERISA plan, they want out of the burdens and the headaches altogether.”
The multiple employer structure gives it to them better than any other because of its one document and one appointing authority, Swisher concluded.
“The burdens associated with having your own plan documents for your own plan sponsor, they go away with a multiple employer plan. It doesn’t mean that there is no work and it doesn’t mean that there is no risk whatsoever, but it is the simplest, safest, most cost-effective way to do the least work.”