Multiple Employer Plans have a brighter future than ever before. Fred Barstein, Founder and CEO of The Plan Sponsor University (TPSU) and Terry Power founder, of The Platinum 401k, and one of the leading experts on multiple employer plans (MEPs), discuss why they make so much sense. They also address whether the industry professionals can anticipate new laws or regulation that would allow unaffiliated organizations to join an open MEP.
Employers regularly use a common carrier for healthcare benefits but most 401k and 403b plan sponsors must design and run their own retirement plan with limited negotiating power. So, what’s the hold-up? And is there now more hope for MEPS since Preston Rutledge is the new EBSA secretary at the Department of Labor.
Full Transcript Here
Fred Barstein with 401KTV. In this week’s Fred Talks we’re privileged to have Terry Power from the Platinum 401K who is really one of the biggest, most acknowledged experts in the MEP or Multiple Employer Plans. We’re going to talk a little bit about MEPs and open MEPs. Welcome, Terry to the Fred Talk.
Thank you, Fred. I’m glad to be here.
Terry is the owner of the Platinum 401K, he’s a TPA and a 316, which means a co-fiduciary on administrative functions as opposed to the 321 or 328, which deals with investments. He’s been in business since 1981 and has worked in the past for John Hancock.
Okay if we ask you a few questions?
Absolutely, looking forward to it.
Very good. Tell us, what is a MEP?
Multiple Employer Plans have been around since the 1950s. They are retirement plans that are made up of companies that lack the ownership connection that would bring them together under a regular traditional single-employer plan. This might be groups such as members of the American Bar Association, for instance. Law firms can join under the ABA plan, that’s a MEP.
Why do plan sponsors want to join? What’s the benefit of a MEP?
A real benefit for a MEP is it allows them to run their 401K plan in much the same manner as they run all their other employee benefit programs. What they would be doing, if you wanted to cover your employees if they were injured or sick, you could go ahead and negotiate with hospitals, or doctors, or pharmacies, or just sign up with the carrier and they make all those decisions. When you think about it, that’s the way every employee benefit program works except 401K.
They’re designed, each plan is designed individually.
Exactly. The employer has to become an expert, or hire experts to help them with documents and investment fund selection of monitoring beneficiaries. It’s a quagmire that most, many cases that results in some pretty serious issues if they don’t do it perfectly.
They all have to design their own investment menu, right?
Exactly. They’re liable for it, too. Under a MEP, that doesn’t happen. Usually, there’s a 338 investment manager. All those decisions are made-
A 316. That liability is outsourced, it’s really 401K outsourcing is what MEPs are all about.
There’s some flexibility still within the MEP.
Oh, absolutely. Plan design for a MEP in many cases is identical to what an employer could get if they just had a single employer plan.[inaudible 00:02:31] enrollment and what the default option has.
I know there’s pending legislation about an open MEP because today companies to join a MEP and to get the full advantage of the reporting, ease of reporting, there has to be some affiliation-
A nexus, a commonality between the-
A nexus, like the American Bar Association.
Correct, or a PEO. Employee leasing companies, they have to use a MEP actually, as of 2002 they must use a Multiple Employer Plan but in an open MEP relationship you don’t have that commonality or that nexus so there are some additional reporting requirements that the IRS requires you to put in place such as individual 5500s, individual audits.
Everyone I’ve talked to, all legislatures, regulators they seem to be for these open MEPs. What’s holding it up and what’s the prognosis for us to get some legislation on this?
Well, this is the same gridlock that occurs in Washington, no difference here. The only glimmering point of optimism we have is that the new EBSA Secretary, Preston Rutledge, is actually the author of the Retirement Enhancement Security Act of 2016. He wrote it as part of the Senate Finance Committee. He is now the Assistant Secretary for Employee Benefits. We’re hoping that he wants to go through and push that agenda. It’s already actually passed the end of the Senate Finance Committee, there are companion Bills in the House, and there’s an additional Bill. There’s actually three different Bills right now, all of which would be tremendous for employers and would offload liability, take care of the so-called one bad apple rule, and also eliminate individual audits for employers that are all participating inside of a MEP.
Cool. We have hope if Washington will get through.
Hope springs eternal in the Multiple Employer Plan arena, that’s correct.
Very good. Well great. Well, thanks for your time. Thanks for watching 401KTV. Look for and ask your TPA or advisor about MEPs and whether they might actually apply to you. Stay tuned and thanks for watching 401KTV.