On August 31, 2018, President Trump issued an Executive Order directing the Department of Labor (DOL) and Treasury Department to take action to “promote retirement security for America’s workers” by, among other things, expanding access to Multiple Employer Plans (MEPs). Specifically, within 180 days of the issuance of the Executive Order, DOL must “consider…whether to issue a notice of proposed rulemaking, other guidance, or both, that would clarify when a group or association of employers or other appropriate business or organization could be an ‘employer.’” Within that same timeframe, the Treasury Department must “consider proposing amendments to regulations or other guidance… regarding the circumstances under which a MEP may satisfy the tax qualification requirements…including the consequences if one or more employers that sponsored or adopted the plan fails to take one or more actions necessary to meet those requirements.”
In response to that Executive Order, DOL on October 23, 2018, published a Notice of Proposed Rulemaking (NPRM) in the Federal Register that “would make it easier for small businesses to offer retirement savings plans to their workers through Association Retirement Plans, which would allow small businesses to band together to offer 401(k) plans to their employees.” Specifically, under title 29 of the Code of Federal Regulations, DOL’s NPRM seeks to clarify the circumstances under which an employer group or association or a professional employer organization (PEO) may sponsor a workplace retirement plan. In particular, the NPRM clarifies that employer groups or associations and PEOs can, when satisfying certain criteria, constitute “employers” within the meaning of section 3(5) of ERISA for purposes of establishing or maintaining an individual account “employee pension benefit plan” within the meaning of ERISA section 3(2). As part of the NPRM, DOL is requesting comments on whether it should address, by regulation or otherwise, whether there are other types of entities that should be treated as an “employer,” within the meaning of ERISA section 3(5), for purposes of sponsoring a MEP. Importantly, the NPRM would apply solely to defined contribution plans.
Under the NPRM, an employer generally would be required to execute a participation agreement or similar instrument that lays out the rights and obligations of the MEP sponsor and the participating employer before participating. However, these employers would not be viewed as sponsoring their own separate, individual plans under ERISA. Rather, the MEP, if meeting the conditions prescribed in the NPRM, would constitute a single employee benefit plan for purposes of title I of ERISA. Consequently, the MEP sponsor – and not the participating employers – would generally be responsible, as plan administrator, for compliance with the requirements of title I of ERISA, including reporting, disclosure, and fiduciary obligations. Continue Reading