Pooled plan providers (PPPs) are now one step closer to being able to offer pooled employer plans (PEPs) under guidance released Nov. 12 by the Department of Labor.
The final rule establishes the registration requirements for PPPs pursuant to the Setting Every Community Up for Retirement Enhancement (SECURE) Act. PPPs can start operating PEPs beginning on Jan. 1, 2021, but they must register with the Labor and Treasury departments before they can begin operations.
Under the final rule, PPPs are required to register at least 30 days before beginning operations by electronically submitting a new EBSA Form PR, but the DOL provides an exception for the period Nov. 25, 2020 to Jan. 31, 2021. As such, the requirement to register at least 30 days prior to operating a PEP during that period is waived—provided registration occurs no later than the start of the plan.
“Pooled employer plans will give employers, especially small unrelated employers, a way of offering their employees a workplace retirement savings option with reduced burdens and costs,” stated Jeanne Klinefelter Wilson, Acting Assistant Secretary of Labor for the Employee Benefits Security Administration. “This final rule lays the groundwork for a sensible registration process so that providers can get pooled plans up and running.”
Filing Obligations
The rule’s requirements are divided into three sets of filing obligations:
- An initial registration filing of basic identifying information about the PPP and information about pending legal or administrative proceedings.
- A supplemental filing for any changes in the information that was reported in the initial registration or if there is a significant new financial and/or operational event related to the PPP (a supplemental filing also is required when a PEP starts operations).
- A final filing once the last PEP has been terminated and ceased operations.
The DOL explains that the requirement for supplemental information is intended to provide the agencies, participating employers and employees, and the public with information about noteworthy events occurring after the initial registration. DOL notes that it considered requiring PPPs to file a registration for each PEP, but decided not to because it would have required pooled service providers to make multiple filings while providing minimal additional benefits.
In response to comments from the American Retirement Association and others about simplifying the registration process, the final rule adopts operation of a PEP as the event requiring prior registration rather than “marketing” or “offering services” as a PPP.
“Preliminary business activities of a would-be pooled plan provider, such as establishing the business organization, creating a business plan, obtaining necessary licenses, entering into contracts with subcontractors or partners, obtaining a Federal employer identification number from the IRS, or actions and communications designed to evaluate market demand, including marketing activity, do not trigger the registration requirement,” the preamble to the final rule explains.
In addition, the final rule treats registration with the DOL as satisfying the SECURE Act requirement to register with the Treasury Department.
What’s Required?
The information to be submitted as part of the Form PR includes:
- The legal business name and any trade name of such person, as well as the employer identification number (EIN), business mailing address and phone number of such person.
- The address of any websites of the PPP or any affiliates to be used to market the PPP or to provide public information on the PEPs operated by the PPP.
- The contact information for the responsible compliance official of the PPP.
- The agent for service of legal process for the PPP and the address at which process may be served on such agent.
- The approximate date when pooled plan operations are expected to commence.
- An identification of the administrative, investment, and fiduciary services that will be offered or provided in connection with the PEP by the PPP or an affiliate, including all persons who are treated as a single employer with the person intending to be a PPP who will provide services to PEPs sponsored by the PPP.
- A statement disclosing any ongoing federal or state criminal proceedings or convictions against the PPP, or any officer, director, or employee of the PPP (a criminal conviction may be omitted if it is outside 10 years of the date of registration).
- A statement disclosing any ongoing civil or administrative proceedings against the PPP or any officer, director or employee of the PPP involving a claim of fraud or dishonesty with respect to any employee benefit plan or involving the mismanagement of plan assets. This appears to take into consideration comments by the ARA urging the DOL to exclude routine audits or investigations or mere inquiries from governmental entities.
DOL Feedback
As to the information regarding “primary compliance official,” it appears that the DOL also addressed the ARA’s comments. The ARA recommended clarifying what information should be reported for the “primary compliance officer,” noting that many service providers employ multiple compliance officers.
Accordingly, the final rule simply requires the identification and basic contact information for the person or entity designated by the PPP as the point person responsible for addressing questions about the PPP’s status under ERISA and the Internal Revenue Code. “Put differently, this provision requires nothing more than for the company to identify whom it wishes to receive and address status and compliance-oriented questions,” the preamble explains.
In response to comments that the Form 5500 is more appropriate for disclosing reportable events, the DOL remarked that Form 5500 data generally is not available for 18 months after a plan starts operation and that the Form PR will allow the department to monitor PPPs and help protect the interests of plan participants and beneficiaries.
The DOL estimates that approximately 3,200 entities will initially register to serve as PPPs, with recordkeepers and plan administrators of existing DC plans most likely to enter the market first, followed by professional employer organizations, chambers of commerce and plan advisors.
The new electronic filing system will be available on Nov. 25, 2020 at https://www.efast.dol.gov/. While filers may begin using the system on Nov. 25, an informational version of the new Form PR and instructions will be made available at https://www.dol.gov/agencies/ebsa in the coming days, according to the announcement.
