States get DOL approval for IRAs, but what about MEPs?

The Department of Labor (DOL) issued a final rule providing states with a safe harbor under which they can create programs that require employers to establish payroll-deduction IRAs for employees.

I would say that’s a positive step, but the fact that there is something better out there that the DOL effectively mothballed 4 years ago and that’s the “open” multiple employer plan (MEP).

IRAs are nice, but employees can save more under a 401(k) plan and employers that wanted to offer retirement plans, but wanted more bargaining power for their plan’s assets and wanted none of the headaches associated with being a plan fiduciary were able to become an adopting employer to a MEP.

Open MEPs were effectively mothballed when the DOL basically said that they weren’t considered one plan for ERISA purposes when there was no commonality between the adopting employers when they issued an advisory opinion for an Open MEP seeking a definitive DOL ruling.

4 years later, and the plan providers who created some great Open MEPs are still awaiting further DOL guidance. The DOL on the other hand, quickly provided guidance on these state IRA program/ Why the difference? Well, let’s just that when President Obama wants something from the DOL, they give it to him when they work for him.

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