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Reish Responds to DOL Advisory Opinion on MEPs

In August, attorney Fred Reish wrote an insightful article for fi360 AIF designees on Open MEPs that is a must-read for anyone involved with multiple employer plans.

Some background: On May 25, 2012, the Department of Labor released an advisory opinion (AO 2012-04A) that overturned several of the key axioms on which Open MEPs had been established. Though in my view many articles and white papers written prior to that date remain fundamentally sound on a number of points, almost all need to be revised to reflect the new DOL guidance. One such foundational MEP piece is the September 2011 Drinker, Biddle & Reath white paper on the subject created for 401kSAFE by Reish, Bruce Ashton and Joshua Waldbeser. Reish’s August 2012 article updates that previous analysis.

Reish wrote the follow-up article to address the impact of the game-changing DOL advisory opinion. He concludes that the DOL position is that Open MEPs are actually a group of single employer plans with shared fiduciary, investment, administration and trust services; and that this should result in each participating employer having their own:
• audit, assuming they meet the DOL definition of a “large” plan (generally 100 or more participants);
• Form 5500 report; and
• ERISA bond.

While referring to the Department of Labor’s viewpoint as “controversial” and “incorrect” in many ways, Reish nevertheless considers the Advisory Opinion the prevailing guidance on Open MEPs for the time being. He advises employers and MEP providers to adapt to the DOL position while awaiting broader guidance.

The Reish article is important for three reasons:
• It puts DOL Advisory Opinion 2012-04A into perspective. Reish refutes the common misunderstanding that the Department of Labor has eliminated open MEPs. He emphasizes that Code Section 413(c) specifically permits multiple employer plans and the DOL does not have the authority to interpret the Code, so the tax qualification of these plans remains unchanged.
• The article emphasizes the outsourcing features of Open MEPs as their primary benefit, offering professional fiduciary services to companies that find their 401(k) program to be difficult to manage and complex to operate properly. In my opinion, this should have been the proper focus of MEPs all along.
• Reish concludes that “almost, but not quite, all of the advantages of Open MEPs will be retained in one form or another.” For those Open MEPs which have restructured and repositioned their value proposition to emphasize the benefits of professional, simplified plan management, this article provides welcome support.

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