These days, all I hear is multiple employer plans (MEPs) all the time. Whether it’s the third party administrator (TPA) who wants to offer it or the financial advisors who want to offer it, I usually average one MEP question a day.
Many MEP critics exaggerate the dangers of MEPs and many MEP supporters exaggerate their benefits. I am in the middle, still trying to tell it like it is (at least in my mind).
MEPs to me are supposed to allow smaller plans of unrelated employers to group together to save money on administration and limit some of their fiduciary liability. To me, MEPs are supposed to offer smaller plans a better plan at a better price, at least in theory. However, MEPs do suffer the very same problems that small plans do. They can have compliance issues that can threaten its tax exempt status and most importantly, they can be very costly.
Like anything else, you have good MEP providers and bad ones. A plan sponsor interested in joining one shouldn’t let the hype overcome good judgment and determine whether the fees and features of the MEP they are considering are right for them because joining the MEP of a costly or incompetent MEP provider defeats the purpose of joining the MEP.
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