In late July, the Department of Labor released a rule allowing small businesses to more easily band together in a joint retirement plan. The idea is that a larger plan will have more leverage to obtain better pricing and better service from vendors. Equally important is the ability of employers to offload some or all of the responsibility for maintaining retirement plans.
The final rule alters the definition of “employer” in ERISA for purposes of who may establish and maintain an individual account defined contribution retirement plan. Under the new rule, a group or association, or a PEO (professional employer organization) can sponsor what the DOL refers to as a “MEP” – a “multiple employer plan.” The regulation is limited to “bona fide” groups, associations and PEOs – which means they must have a business purpose or other common connection, and not merely have the purpose of providing the retirement plan. In this way, the new rule mirrors the DOL’s regulations intended to expand the availability of association health plans (“AHPs”), which is currently stalled due to litigation.
The DOL touted MEPs as a way for small employers to relieve themselves of reporting, disclosure and fiduciary obligations that normally burden plan sponsors, noting that the bona fide group, association or PEO would serve that role. In a theme familiar to those familiar with ERISA’s system of fiduciary delegation and oversight, however, the DOL cautioned that the participating employer would still be responsible for prudently selecting and monitoring the MEP sponsor.
This is the latest in a long trend of attempts to standardize and streamline ERISA benefit plans. Custom-tailored and specialized benefit programs are going by the wayside. In their place are cookie-cutter standardized plans. Perhaps trading flexibility in exchange for decreased employer risk and administrative burden will be worth it – perhaps we will see a much-needed increase in the offering of retirement programs to shore up America’s otherwise bleak retirement security. Time will tell!