Stargazer What's New on Multiple Employer Plans ("MEPs")

The Basics.

We serve a bunch of Multiple Employer Plans (“MEPs”) at BlueStar.  Based on the questions we’re fielding, some of the recent legislative & regulatory happenings have caused a little confusion.  Here’s my attempt to mitigate that confusion.  Let’s focus on these basic points:

• RESA and the SECURE Act are legislative initiatives proposing the expansion of the availability of MEPs as an effort to make retirement plans available to more employees. In other words, they are attempts to make it easier and less burdensome for certain employers to provide a retirement plan for their employees.  To that end, there is a lot in these proposals that could potentially expand when MEPs can be created and who can sponsor them.  While these legislative initiatives have received a lot of attention, they are NOT yet law.  Recall the Schoolhouse Rock bit we saw as kids during morning cartoons: “How a Bill Becomes a Law”; a bill needs to be passed by both houses of Congress and then signed off on by the President to become a law.  Hasn’t happened yet.
• Existing law really only permits MEPs in three scenarios: related companies not meeting controlled group or affiliated service group standards; associations; and Professional Employer Organizations (“PEOs”) (click here to learn what a PEO is!). PEOs and associations have been sponsoring MEPs for years; no news here.  However, it is true that some folks have historically been nervous about how clear it really was that PEOs and associations can sponsor a MEP.
• The Department of Labor’s (“DOL”) authority is limited to creating regulations around existing laws.  Since there is no existing law which really permits the use of MEPs beyond PEOs and associations, there’s nothing the DOL can say or do to effectively expand that.  However, the DOL has requested input on the PEP/Open MEP concept.
• But you probably heard the news about a new DOL regulation focusing on explaining ERISA’s definition of “employer”. This is important because “employers” can sponsor a plan.  This new regulation focused on three areas: PEOs, associations, and owner-employees.  In short, the new regulation defines the circumstances under which PEOs and associations can sponsor MEPs, and further clears up some regulatory murkiness surrounding an owner-employee’s ability to have a retirement plan covering themselves.

The Punch Line.

• No, we do not yet have Open MEPs, PEPs, etc.
• We DO have a clearer set of rules regarding the ability of PEOs and associations to sponsor MEPs.
• We DO have a clearer set of rules regarding owner-employees.
• Questions? TWerner@BlueStarRetirement.com

Thanks for reading!

Tim Werner, President