[Update: Comments added to better reflect Swisher’s overall view of the MEP as a “powerful tool moving forward.”]
“Don’t sell MEPs.”
It was a bit of a shocker from multiple employer plan (MEP) expert and advocate Pete Swisher at the Kohler 2018 Conference, an annual retirement plan study group held each summer in rural Wisconsin.
While his opening comments were meant to get attention, it was how MEPs are currently positioned and presented, rather than the structure of the product itself, that Swisher was targeting.
“Will MEPs close the retirement plan coverage gap? No, they won’t,” the senior vice president and national sales director with Pentegra Retirement Services, soberly told attendees during a rapid-fire presentation. “MEPs will do really cool things, but they won’t magically solve some of these problems. There are core costs to running a 401k plan, and an employer with, say, six employees could certainly be better off with a SIMPLE IRA.”
He also implored advisors to stop calling it an MEP, reasoning that once the word is used “it becomes a thing, or a product to sell, and the employer doesn’t want to be sold.”
Likening it to widely reported research that shows participants like the concept of guaranteed income but are immediately turned off by the word “annuity,” the focus should be on what they can (and can’t) do for plan sponsors and participants, rather than on the term itself.
“MEPs are marketed as helping someone be a perfect fiduciary, but too often employers don’t want to be a fiduciary at all; they want out of the middle because it’s too complicated,” he added. “I had the best quote from a client to illustrate. She said, ‘I don’t know what I don’t know and, more importantly, I don’t want to know what I’m supposed to know.’”
MEPs allow people “to do that” by structuring it in a way to transfer fiduciary liability, but they can be a way to steer employers towards more fiduciary responsibility, depending on the individual wishes of that particular sponsor.
“It’s a different type, or shade, of multiple employer plan, but it can be done,” Swisher concluded.