MEPs Part One - You’re A Chamber of Commerce: Should You Sponsor a MEP for Your Members?

Introducing FPG’s “Multiple Employer Plan” (MEP) Overview and Evaluation Series

As a result of an Executive Order issued by the White House last fall, the U.S. Department of Labor has proposed changing the rules to widen the range of organizations that may sponsor 401(k) plans. If the proposal is finalized generally as proposed a broad array of associations, employers and other group may be able to sponsor what are called “Multiple Employer Plans” or MEPs. This could be a big and beneficial change both for employees and for employers, especially those who either do not currently have a 401(k)-type of plan or who are looking for a way to reduce or eliminate some of the significant responsibilities associated with having a retirement plan benefit.

Beginning today and running regularly, but not exclusively, through the next few months we offer you a series that will cover not only MEP fundamentals but also ways in which Chambers of Commerce or groups of employers, for example, might choose to provide their members with access to such a benefit. In addition to Chuck Humphrey’s always insightful commentaries we have invited national leaders in multiple employer plan development and advocacy to share their unique perspectives on the industry, best practices and potential pitfalls that you should be aware of.

We also plan to provide you with a MEP guide and checklist distilling the essence of what we are covering in the series as well as adding further insights and practical information on the opportunity this presents. Welcome to our first installment which follows below:

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You’re A Chamber of Commerce: Should You Sponsor a MEP for Your Members?

This is the first in a series of posts on the U.S. Department of Labor’s proposed changes to the MEP rules.

As a result of an executive order issued by the White House this Fall, the U.S. Department of Labor proposes to amend its rules to widen the range of organizations that may sponsor 401(k) plans. If the proposal is finalized generally as proposed, a chamber of commerce (and certain other groups of businesses or employers as well) will sometime this year be able to sponsor on behalf of, and for, its employer-members a 401(k) plan. But if you are a chamber, should you?  What factors should you consider in making such a decision? 

Why would you want to sponsor a MEP?

Your members tell you they want you to.

They may perceive a MEP, short for “multiple employer plan,” as less expensive than a 401(k) plan they might otherwise establish on their own. They may see it as something that carries fewer administrative burdens and less exposure to personal liability than their own stand-alone, “single employer” arrangements. You may have these perceptions, too, and certainly the “MEP industry” is gearing up to convince you and potential plan sponsors this is true. These benefits are the undergirding premises of the Labor Department’s proposal. But these premises, as the Labor admits in the preamble to the proposed rules, are really only hypotheses, and like all hypotheses they must be tested.

Things to consider.

Will MEPs be cheaper? Do they carry fewer burdens and less exposure to personal liability? Will they be compelling to your members? Which of your members are likely to be advantaged by them and desire them? Those with existing plans? Those who don’t have existing plans? Members with lots of employees or members with only a few? What are the implications of sponsorship of your organization? Do you want to assume the burdens and liabilities associated with sponsorship of a MEP? Do you know what they are? How will you communicate the MEP to members? What will be your start-up and ongoing costs? Who will be your plan service providers? Will you have to retain benefits counsel? Will you have to add staff? Your questions and decision making will look much like that of an employer deciding to adopt a plan. In this you will need to understand 401(k) plans legally and technically and learn the 401(k) marketplace. This is a complex but not impossible task requiring expert, experienced, independent, and unbiased support. 

The first thing you need to know is that there is help readily available to you in this decision making and in managing the responsibilities of sponsoring a MEP if you go forward. So, when you read “you” below, remember that. In our view, the opening up of the MEP market provides a significant opportunity for Chambers of Commerce, as well as a wide range of other associations, to add real value for members, especially smaller businesses who struggle to offer competitive benefits to their employees.  

Fiduciary Plan Governance can assist you in understanding and evaluating this opportunity. If you’d like to know more, just contact us directly at info@fiduciaryplangovernance.com for a brief, no cost, no obligation consultation. 

What will be your responsibilities? You will stand in the shoes, and act on behalf, of your participating member/employers. This means that you will be responsible for adopting and maintaining a plan document (and interpreting it), overseeing the administration of the plan, hiring and monitoring plan service providers, providing a menu of investment options for investment by participants, communicating with employers and with participants, providing legal required disclosures to participants, assuring that employer contributions are timely remitted to the plan trust, and that discrimination testing, securing an ERISA fidelity bond, coverage and other compliance issues are addressed and corrected, if necessary.

In our next post in this series, we fill in the blanks on what your responsibilities entail. 

Chuck Humphrey focuses his practice on employee benefits and is the principal of Law Offices of Charles G. Humphrey, Buffalo, New York, a consultant to Fiduciary Plan Governance, LLC, and the author of The Fiduciary Responsibility eSource, available at ERISApedia.com.