DOL final rule expands retirement plan options for SMBs

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The Department of Labor finalized a rule Monday expanding the access of multiple employer plans (MEPs), a boon to small and medium employers.

Under the rule, association retirement plans could be offered by associations of employers in a city, county, state, multi-state metropolitan area or in a particular industry, nationwide. The final rule also allows plans to be sponsored through professional employer organizations — or a human-resource company that contractually assumes certain employment responsibilities for its client employers.

The rule enables small businesses to offer benefit packages comparable to those of large employers. The DOL expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses' hand when negotiating with financial institutions and other service providers. The final rule will go into effect on Sept. 30.

“The DOL took a good first step toward allowing more employers to participate in MEPs with the issuance of its final rule on association retirement plans,” says Jan Jacobson, retirement policy senior counsel at the American Benefits Council. “As the DOL recognized in the final rule, cost and regulatory complexity can discourage many employers, especially small employers, from sponsoring retirement plans.”

MEPs can be attractive to those employers because of potential cost savings and the MEP sponsor taking on the typical responsibilities of a sponsoring employer, including reporting, disclosure and fiduciary obligations, she adds.

Phil Waldeck, president of Prudential Retirement, also commended the move, saying the DOL has recognized the importance of enabling gig workers to participate in and receive the protections of ERISA-covered retirement plans. The company was pleased the department is open to considering broader MEP sponsorship including from financial services, he adds.

"Critical to ensuring that employers and workers have access to high-quality, cost-effective retirement plans is ensuring a robust and competitive MEPs marketplace," Waldeck says. "We also look forward to working with the department in expanding MEP offerings to all ERISA-covered benefits, including life and disability benefits.”

But many in the industry have said the rule doesn’t go far enough, and that this approach to MEP sponsorship could limit the development of a real, comprehensive and competitive marketplace. However, provisions addressing those concerns have been incorporated in a number of recent legislative proposals, most notably the Setting Every Community Up for Retirement (SECURE) Act.

“Although the American Benefits Council would have liked to see more even expansion of the availability of MEPs, [ABC] was also pleased to see the DOL’s Request for Information on “open” MEPs, perhaps signaling a willingness to consider further expansions,” Jacobson adds.

Alongside the rule, the DOL also published a request for information in response to a number of comments in the proposed rule, noting “many commenters asked the department to give further consideration to facilitating ‘Open MEPs,’” and the agency will seek comments on whether to amend our regulations. Those responses are due by Oct. 29.

“Less than a year ago, President Donald Trump signed an executive order focused on expanding quality, affordable workplace retirement plan options for America's small businesses and their employees,” Acting Secretary of Labor Patrick Pizzella said. “Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans. Association retirement plans offer valuable retirement security to small businesses' employees through their retirement years.”

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Retirement planning Retirement benefits Retirement income Retirement readiness 401(k) Financial planning Small business DoL