By Janis Gough

Beginning in 2021, small-business clients will have even more options for providing retirement benefits to employees.

The Secure Act removed the commonality of interest requirement that previously limited multiple employer plans (MEPs) to business owners who shared the same geographic location or industry—creating a new type of MEP. Under the Secure Act, employers will be able to offer MEPs, association retirement plans (ARPs), and pooled employer plans (PEPs). 

ARPs and PEPs are simply expansions on the MEP. Small business owners who may consider these options should understand all three structures before jumping into the MEP pool.

Multiple Employer Plans (MEPs): The Basics

The basic premise behind the idea of MEPs has remained the same—multiple small businesses join together to reduce the administrative burden and potential fiduciary responsibilities of offering a 401(k)-type retirement plan. However, Congress enacted the Secure Act to even further ease the restrictions on the types of employers who can join together, assuming additional criteria are satisfied and eliminate some of the risks associated with MEPs. 

Association Retirement Plans (ARPs): 

In 2019, the DOL released regulations designed to expand access to MEPs. Some in the industry began referring to these new MEPs as (ARPs)… association retirement plans.  ARPs must satisfy additional criteria to be treated as qualified plans. The terms for ARPS and MEPs have mostly been used interchangeably. Under the ARP structure, employers that share only the same geographic location or industry are permitted to join together in the MEP. The participating employers can be located in the same city, county, state, or even multi-state region. Companies operating in the same industry can join together also if they work in entirely different regions. The ARP can be sponsored by a permitted group of employers but must be bona fide with documents stating (the organization of employers must be bona fide, with organizational documents acknowledging control over the ARP.

ARPs can join a plan sponsored by a professional employer organization (PEO). When a PEO is used, that PEO must accept administrative responsibility for substantial employment-related duties, such as for paying wages to employees, including all withholding and reporting responsibilities. The PEO must also have a role in recruiting, hiring, and firing employees of the participating employers, and must play a substantial role in administering the employers’ benefits offerings. 

Pooled Employer Plans (PEPs) Post-Secure Act

Beginning in 2021, the Secure Act permits MEP participation for employers who share no common interest apart from the desire to offer a retirement plan. The Secure Act also eliminated the concern (“one bad apple” rule) by providing that the entire plan would not be disqualified based on a single participant’s actions.

These types of MEPs are also called pooled employer plans (PEPs), another name for a type of MEP, that must meet the same rules and will be treated as a single retirement plan. This group will only be required to file a single Form 5500 (an annual report filed with the U.S. Department of Labor (DOL) that contains information about the retirement plan’s financial conditions, investments, and operations). In general, all retirement plans, such as profit-sharing and 401(k) plans, must file a Form 5500 for every year the plan holds assets). The need to only file one form reduces the administrative burdens for each of the individual employer-participants. This type of “open MEP” must be administered by a pooled plan provider (generally, a financial services firm). Use of the pooled plan provider to act as both plan administrator and a fiduciary and is intended to ease both the administrative burden and fear of fiduciary liability for small business owners. The pooled plan provider must register as a fiduciary with the Treasury Department and the DOL and must have a trustee responsible for monitoring contributions and dealing with subsequent issues that arise.

Small businesses with MEPs still bear fiduciary responsibility with respect to selecting and monitoring the pooled plan providers. Pooled plan providers can outsource investment decisions to another fiduciary (likely what is known as a “3(38) fiduciary”). This arrangement does spread the costs of investment advice among the MEP participants to reduce expenses, but the extent of the employer’s fiduciary exposure still remains unclear under the law.

 At the most basic level, ARPs and PEPs are a product of the MEP’s evolution, representing the loosening of MEP restrictions that have been granted in exchange for satisfying certain additional requirements under the new laws. 

Janice Gough is a Financial Advisor in Palm Springs and can be reached by calling760) 251-7724 or (650) 200-8291 Contact us to sign up for our newsletter or send your questions to or via email at