A proposed rule published by the U.S. Department of Labor (DOL) could allow small business employers to set-up association retirement plans for their employees.
The Department recently issued a Notice of Proposed Rulemaking (NPRM) under Title 29 of the Code of Federal Regulations, officially titled “Definition of an ‘Employer’. With this new proposal, published in the Federal Register since October 2018, small businesses would be permitted to join a Multiple Employer Plan (MEP), either through a group, association or Professional Employer Organization (PEO).
Under the Department’s proposal, associations would effectively be acting as the “employer” sponsoring the plan. As a result, the administrative responsibilities, such as asset management, benefit payments, governmental filings, and other regulatory processes, will be in the hands of the associations – decreasing the administrative cost for small business owners.
By making it easier and more cost-effective for small and midsized businesses to offer workplace retirement, such as 401(k)s, small business employees, sole proprietors, as well as their families, will be able to benefit from retirement plans generally offered at larger businesses.
However, Karen Scheffler, senior Employee Retirement Income Security Act (ERISA) counsel at Alliance Bernstein, in New York, believes there are other key factors that will determine whether a small business owner finds open MEPs appealing or not.
According to Scheffler, small business employers are still unaware of the recordkeeping costs this type of program will require. In addition, the fiduciary liability relief has not been determined, and the complexity of these plans may make it difficult for an employer to know which option will suit their business best.
To open access to retirement saving options, the proposal was released with a set of recommended regulations that seeks to clarify the conditions under which an employer may sponsor an association retirement plan.
Who Would be Able to Offer Association Retirement Plans?
- Employer associations.
- Trade groups.
- Professional Employer Organizations (PEOs).
The Department's NPRM is followed by a notice of inquiry (NOI), where comments from the public are invited for 60 days, with an additional 30 days for reply comments. The comments for the latest DOL proposal will close on the 24 December 2018.