Multiple employer plans (MEPs) are a topic that many plan providers talk about, but don’t really know what’s allowed and what’s not.
A multiple employer plan is a plan where unrelated employers adopt a plan and it should be treated as one plan for purposes of filing a Form 5500.
There was something called an open MEP where the employers were unrelated to each other. Then there was something called a closed MEP, where there was a connection or nexus between all of the adopting employers, such as members of a trade group.
In 2012, an Open MEP unwisely sought guidance from the DOL on whether their MEP qualified as a single plan for purposes of Form 5500. The DOL said it did not because there was no connection between adopting employers and the Open MEP plan sponsor wasn’t an employer, it was just a company created by the financial advisor to sponsor a MEP. The DOL stated that all of the adopting employers needed to file a Form 5500, which defeated one of the most important features of a MEP.
People thought this was the death of Open MEPs. It was in the sense that there is no more Open and Closed MEPs, there are just MEPs that will qualify as a single plan and MEPs that won’t. Most importantly, the DOL never provided any further guidance on MEPs which means that the advisory opinion issued in that Open MEP case was only applicable to that Open MEP in question. It gave the DOL’s thinking on MEPs and a blueprint for MEP operators to develop a MEP that could be considered a single plan for 5500 purposes.
Three years later, there is still no guidance and there are plan providers who are spreading stories about MEPs on what qualifies as a single plan and what does not. In the end, it’s just opinion without real DOL guidance.
Congress and the White House support the idea of MEPs. Thanks to some cajoling from President Obama, the DOL is considering allowing individual states to operate MEPs and prepare guidance that will allow them to operate MEPs that will likely be considered a single plan for purposes of a Form 5500. What does this all mean? While states may or may not want to be in the MEP business, I believe that this will actually allow Open MEPs again to be considered a single plan again. Why? I don’t think court scrutiny would allow the DOL to allow what is essentially an Open MEP operated by states and not allow Open MEPs by plan providers with the experience in knowing how these plans run. Maybe I’m off base, but I think the DOL will have no choice but to allow Open MEPs to breathe again if they are allowing states the same opportunity in running them because having adopting employers all from the state isn’t a sufficient connection/nexus as outline in that 3-year-old advisory opinion. What’s good for the state should be good for plan providers. That’s just my opinion, but you heard it here first.