Support for retirement plans at work is growing not just at the local level where more than 30 states have approved or are considering legislation that would require employers to offer a plan at work, but also at the federal level as the Senate Finance Committee recently unanimously approved a bill allowing for open MEPs (multiple employer plans).
With growing concern about giving people access to retirement plans at work where workers are 15 times more likely to save, the move to allow companies to pool assets and resources under a MEP is generally supported by most of the industry. Smaller companies struggle with the cost, complexity and liability of running an ERISA plan like a 401k and have limited buying power which can lead to high fees and low levels of service. MEPs offer a great alternative
For example as described at a TPSU program held at the University of Georgia in Atlanta, a bottling business’ association at a major soft-drink company banded together to form a MEP hiring an experienced administrator to oversee the plan for 28 entities enjoying better pricing, fund selection and service standards that would otherwise not be available to any one of them. In addition, many of the day-to-day tasks including the burden of audits and maintaining an investment committee are managed by the retirement benefits administrator employed by the association which oversees the MEP. They rely on an experienced 401k administrator that they would otherwise not be able to afford to help manage their fiduciary responsibilities.
The new legislation would allow companies that don’t have a connection or nexus to join a MEP as well as eliminate the “one bad apple rule” where the tax disqualification of one member would not affect others.
Some experts are predicting that the new DOL fiduciary rule set to become effective April 10, 2017 will leave many smaller plans without access to an advisor as many will not be allowed or want to serve as a fiduciary to the plan. Along with greater buying power and limited liability, MEPs may offer smaller plans access to advisory services they may not be able to get on their own.