I was always a fan of “open” multiple employer plans (MEPs) because it allowed smaller companies to get better pricing on plan expenses and choice of investments and providers by aggregating with smaller, similar plans.
The Department of Labor (DOL) in its “wisdom” put a kibosh on almost all open MEPs in May 2012 by stating that there needed to be a nexus or connection between the participating employers of the plan in order to be considered a single plan for Form 5500 and one 5500 for a MEP was a strong selling point for plan sponsors who no longer wanted the responsibility of filing one.
We expected to hear some guidance from the DOL other than the advisory opinion that was guidance for one particular MEP that had high fees and a questionable structure since the plan sponsor was just a shell of the service provider.
3 and half years later, it seems that we have some guidance. A few weeks back, the DOL unveiled an interpretive bulletin that will allow states to start a payroll deduction Individual Retirement Account Program for employers and not subject to that plan to ERISA especially when they may require employers that don’t offer a retirement plan to join it. In addition, Phyllis Borzi from the DOL opined that she might be open to regional MEPs where regional states may offer a plan to employers that don’t have a plan.
What does this mean? The DOL maybe more receptive to MEPs especially since it will increase retirement plan coverage, but we wouldn’t have been in this conundrum if we had guidance on what would constitute an open MEP that would be a single plan more than 3 ½ years ago. Government action on retirement plans are slow, heck fee disclosure regulations were talked about for 10 years before they were implemented, so we’re 6 ½ years early if you look at it as a glass that’s half full.