Many smaller companies struggle with the cost, complexity and liability of a 401k plan covered under ERISA. So many companies in associations or affiliated groups band together in what is known as a multiple employer plan or MEP to leverage greater buyer power and offload some of the work and liability. At a TPSU program held at the University of Georgia, the administrator at a MEP covering almost 5,000 employees at 28 separate companies extols their benefits.
Some members of 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.
In the best of all worlds, each bottler can customize their plan determining, for example, their match, default deferral rate, loan policies and whether they want to take advantage of safe harbor provisions. They also get to hear what others are doing for their employees’ retirement plans through reports, sharing at meetings as well as conversations with the administrator acting as a liaison.
Some experts predict that more small companies will join a MEP or some form of pooled investment scheme even if they are not part of an association in what is called open MEPs as the DOL is considering relaxing restrictions on them. They recently provided exemptions from ERISA entirely to state run MEPs.
Pooling resources to get a better deal for employees while delegating work to a professional and still being able to customize some aspects of their 401k plan seems attractive for smaller companies where the HR and finance professionals juggle many tasks.
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