As the effective date for Pooled Employer Plans (PEPs) nears, the Labor Department has published a proposal regarding how the Pooled Plan Providers (PPPs) that administer those programs will be registered in accordance with the SECURE Act.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted in December 2019, eased the previous rules that had restricted Multiple Employer Plans (MEPs) to employers that have a common interest or relationship. As such, the legislation authorized[i] the establishment of PEPs, which are plans sponsored by PPPs that may be joined by multiple, unrelated adopting employers.
The legislation requires, among other things, that the PPP be a named fiduciary of the PEP, must be responsible as the plan administrator, and must register with the DOL/IRS—and that requirement underlies the new proposal.
The Requirements
The proposal calls for an initial registration filing and supplemental filings to report changes in the information in the initial filing, information about each specific PEP before initiation of operations, and information on specified reportable events, time-sensitive knowledge of which are important for the Department, the Treasury Department, and the IRS to carry out oversight and for participating employers to be able to exercise their fiduciary duties of selection and monitoring. The proposal would require a final filing once the last PEP has been terminated and ceased operations.
The Labor Department is now proposing that the first part of the process be an initial “registration” filing of basic identifying information about the PPP as well as additional information about its “structure, affiliated service providers, marketing activities, and pending legal or regulatory proceedings.” The second part is described as a “supplemental filing requirement” intended to provide the agencies, participating employers and employees, and the public information about reportable events, which the Labor Department says would include “any change in the information filed as part of the initial registration and also significant financial and operational events related to the pooled plan provider and the pooled employer plans it sponsors.” More on that in a minute.
Getting Started
For purposes of the initial registration, the Department proposes to define “beginning operations as a pooled plan provider” to mean publicly marketing PPP services or publicly offering a PEP. This is in order to “provide the Department, the Treasury Department, the IRS, prospective employer customers, and the public with notice and relevant information about the pooled plan provider” before it begins operations. Indeed, the proposal calls “important registration triggers” the initiation of public marketing services as a PPP or publicly offering one or more PEPs.
However, the proposal states that the Labor Department does notintend to require registration as a result of preliminary business activities, including “establishing the business organization, creating a business plan, obtaining necessary licenses or entering into contracts with subcontractors or partners, obtaining an federal employer identification number, or actions and communications designed to evaluate market demand in advance of publicly marketing pooled plan provider services or publicly offering one or more pooled employer plans.”
What is Required
The Labor Department is proposing that a prospective pooled plan provider would need to file the following information 30 to 90 days before beginning operations as a pooled plan provider:
- Legal business name and any trade name (i.e., “doing business as”).
- Federal Employer Identification Number (EIN).
- Business telephone (to provide a way for interested/participating employers and covered employees to contact the pooled plan provider for information—comments are requested as to whether this data element should allow a call center number to be reported as the business telephone number).
- Business mailing address.
- Address of any public website or websites of the PPP or any affiliates to be used to market any such person(s) as a PPP to the public or to provide public information on the PEP operated by the PPP.
- The name, mailing address, telephone number, and email address for the primary compliance officer of the PPP (so that the DOL, participating employers and covered employees “have an effective means of communicating with a responsible person at the pooled plan provider regarding compliance questions or concerns”).
- The agent for service of legal process for the PPP and the address at which process may be served on such agent, and in addition, a statement that service of legal process may be made upon the PPP.
- The approximate date when pooled plan operations are expected to commence (the SECURE Act requires that the registration must be filed before the PPP begins operations—recall that the DOL is proposing that the registration be filed not more than 90 or less than 30 days before the PPP begins operations).
- A description of administrative and investment services that will be offered or provided by the PPP, including identification of any affiliates expected to have a role in the provision of those administrative and investment services, and a description of the roles of such affiliates.
- A statement disclosing any federal or state criminal conviction related to the provisions of services to, operation of, or investments of, any employee benefit plan against the PPP, or any officer, director, or employee of a PPP, if the conviction, or related term of imprisonment served, is within 10 years of the date of the registration.
- A statement disclosing any ongoing criminal, civil or administrative proceedings related to the provisions of services to, operation of, or investments of any employee benefit plan, in any court or administrative tribunal by the federal or state government or other regulatory authority against the PPP or any officer, director or employee of the PPP.
As noted above, the proposal would also require additional filings for:
- any changes in the previously reported registration information; and
- specified events affecting either the PPP or a plan it sponsors that may signal financial problems or other circumstances that could potentially put the pensions of covered employees at risk.
“Without this kind of timely information, the agencies would typically not learn of risks to a pooled employer plan until the plan files a Form 5500, possibly many months after the event and when opportunities for protecting plan participants from financial injury have been missed,” the Labor Department explains, going on to note that this would also help ensure that the information regarding pooled plan providers posted on its website and available to the public is up to date.”
The Department expects at a later date to propose new questions on the Form 5500 that would ask whether a pooled plan provider filed its registration statement with the Secretary, including any required updates, and to report the electronic confirmation number provided to the pooled plan provider at the time that the registration was received.
‘Stop’ Signs
As proposed, if a PPP has ceased operating all PEPs and has filed a supplemental reportable event filing to indicate that the last PEP for which it served as the PPP has been terminated and ceased operating, the provider would be required to file a final registration filing. For this purpose, a plan would be treated as terminated and having ceased operations when a resolution has been adopted terminating the plan, all assets under the plan (including insurance/annuity contracts) have been properly distributed to the participants and beneficiaries or legally transferred to the control of another plan, and when a final Form 5500 has been filed for the plan.
This proposal also includes a provision to require electronic filing of all PEP registrations with the Labor Department, noting that electronic filing should also facilitate the disclosure of the information to participating employers, covered participants and beneficiaries, and other interested members of the public. And, once a registration statement is filed, the data would be posted on the DOL’s website and be available to the public.
The Labor Department plans to use the same system and registration process for filing the PPP registration that plan administrators currently use, and that PPPs will use, to file the Form 5500 for employee benefit plans, including PEPs.
With its proposal, the Labor Department is inviting comments from interested persons on all facets of the proposed rule, “…not only on the specific provisions of the proposal as set forth in this document, but on other issues[ii] germane to the subject matter of the proposal.”
The Department believes that 30 days will afford interested persons an adequate amount of time to analyze the proposed rule and submit comments.
The proposal is the latest of a number of rules and proposed rules from the DOL in recent weeks, including a proposed rule to clarify standards on ERISA plan investments (notably ESG-themed investments), announced “deadline relief and other guidance” related to the impact of the Coronavirus outbreak—including expanded “good faith” application of electronic delivery, unwrapped its much anticipated fiduciary rule, and published an Information Letter that affirmed private equity investments as a component of a professionally managed multi-asset class vehicle structured as a target date, target risk or balanced fund can be offered as an investment option for participants in defined contribution plans under ERISA—and most recently an Interim Final Lifetime Income Disclosure Rule.
There is a fact sheet about the proposal online at https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/pooled-plan-provider-registration.
[i]The SECURE Act also provides that each adopting employer retains fiduciary responsibility for the selection and monitoring of the PPP or any other person designated as a named fiduciary of the PEP.
[ii]Specifically, the Labor Department also requests comment on the following questions:
- Is the definition of “beginning operations as a pooled plan provider,” which determines whether initial registration is required, appropriate in scope?
- Are there any additional classes of information or types of reportable events that should be included in the registration requirement?
- Is there a more efficient or effective way of collecting reportable event information that would reduce administrative burdens and expenses?
- Could the burden associated with the collection of reportable event information be reduced by better aligning the collection with other disclosure requirements for pooled plan providers?
- Are there other federal or state filings for insurance companies, banks, and other financial institutions, such as the Form ADV (or similar Securities and Exchange Commission (SEC) or State registration forms) for financial advisors, on which the Department could rely as an alternative source of information about pooled plan providers and the plans they operate?
- Are there particular forms or numbers (e.g., Form ADV, SEC registration number, Central Registration Depository number, or National Association of Insurance Commissioners Code) that could be referenced in the registration that would, with nominal burden, help employers find more information about pooled plan providers and compare providers across platforms of available information?
- Should the disclosure of “ongoing criminal, civil, or administrative proceedings related to the provisions of services to, operation of, or investments of any employee benefit plan by the pooled plan provider” be expanded?
