Pentegra: The Second MEP Gold Rush is Upon Us. Retirement plan governance expert Pete Swisher at Pentegra Retirement Services recently penned an article asking the question, “Are we headed for a second ‘gold rush’ for multiple employer plans (MEPs) and pooled employer plans (PEPs)?” Spoiler alert: the answer is yes.
The article takes a look at the history of multiple employer retirement plans vis a vis current, favorable legislation being considered in Congress. Swisher points out that lawmakers have always been fans, by and large, of the MEP structure. He writes: “The consensus today is that the question is not if, but when, MEP legislation will pass, although nothing is certain.”
In its simplest iteration, a MEP is an employee benefit plan that can be maintained as a single plan by two or more unrelated employers. It is seen by many in the industry as a viable way to help close the retirement benefit coverage gap in the small employer universe. What’s more, the current proposed legislation is aimed at easing some of the rules around MEPs, which would make their implementation and management less complex for smaller employers. MEPs are attractive because they allow small employers to collectively leverage their buying power and benefit from the lower costs usually only available to their larger-plan counterparts.
Swisher examines how MEPs came into being, their evolution, their status, and the current state of the legislation today. It’s a deep dive into the history of MEPs and their significance in light of the current renewed interest from the industry and lawmakers.
He points out that the period from 2003-2011 was the first MEP gold rush, which taught us that: “interest in MEPs was widespread, knowledge of MEPs was not, and the gold rush ended when the DOL threw a wet blanket on the party.”
Swisher also outlines the deep and colorful history surrounding the DOL’s issue with MEPs. In short, he writes: “The DOL’s stance was widely perceived as limiting the industry’s ability to employ MEPs…” However, today, Swisher observes Congress is supportive of MEPs because of their ability to “… improve coverage and governance and reduce long-term costs in the retirement system.”
There are more than a handful of MEP proposals in Congress right now seeking to ease MEP rules. Despite the glut of, in Swisher’s words, “MEP-friendly legislation, interestingly, he also points out that such legislation may not actually be needed to further MEPs’ existence. “In short, legislation favorable to MEPs will unquestionably help promote MEPs, but may not actually be necessary from a technical perspective,” he writes.
The bottom line is that there continues to be a surge of appetite in the industry, particularly among providers and advisors, for MEP solutions. Many are waiting for the legislation to pass; still, others are taking proactive action to implement solutions now. MEPs are likely to experience heightened uptake in the coming years. It may be easier to implement once the legislation is passed, but if you’re considering a MEP, you have the option and opportunity to pursue either path — wait or move forward sooner than later. The choice is yours.
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