In Advisory Opinion 2012-04A, the Department of Labor fundamentally changed the prevailing wisdom on “open” MEPs, indicating that these arrangements should be considered to be individual plans rather than a single plan having multiple adopters. In a new article, “A Comparison of MEWAs and Open MEPs Suggests That MEPs Should Not Be Regulated Like MEWAs,” Charles G. Humphrey makes the case that the watershed DOL opinion relies too heavily on a questionable comparison with Multiple Employer Welfare Arrangements (MEWAs).
Citing 2012 testimony provided by Phyllis Borzi, Assistant Secretary of the DOL’s Employee Benefits Security Administration (EBSA) to the U.S. Senate’s Special Committee on Aging, Humphrey suggests that “DOL’s current views are based primarily, if not entirely, on its old concerns with MEWAs and not on any particular evidence that open-MEPs have been subject to particular and identified abuses.”
In her March 7, 2012 testimony, Ms. Borzi referred to the “difficult experiences” her department had in the past with MEWAs due to financial insolvency and evasion of state oversight. Humphrey argues that these issues were specific to the unique legal and financial structure of MEWAs and cannot be applied to open MEPs.
In my view, a highlight of Humphrey’s article is his grid providing a side-by-side comparison of retirement plan open MEPs versus the MEWAs used by health and welfare plans. The table compares ERISA oversight, state law, funding characteristics and other factors that collectively suggest the MEWA/MEP analogy is a tenuous one.
Humphrey then directs the reader back to the potential benefits of properly managed open MEPs — economies of scale, professional fiduciary oversight and outsourcing of administrative burdens from ill-equipped small employers. All of these, he suggests, “serve the statutory mandate of operating plans for the benefit of participants and beneficiaries …”
Humphrey’s paper calls for the DOL to move beyond the MEWA/MEP analogy and provide guidance for open MEPs on their own merits, supporting their potential contribution to public policy objectives. To that end, he asks for DOL to establish reasonable operational rules that protect plan participants without adding prohibitive cost and complexity to a plan structure that is intended to make retirement plans more simple and cost-efficient for small businesses.
In a September 2012 report to the U.S. Senate, the General Accounting Office also appeared to be calling for a more thoughtful study of open MEPs by DOL, calling for EBSA to gather more MEP data and for the DOL or and the IRS to coordinate their efforts to produce a unified set of regulations for the MEP industry to follow. Charlie Jeszeck, GAO's director of education, workforce and income security, and author of the GAO report, commented that, “It might be useful if [IRS and DOL] coordinated what they were doing. Regulations that come out that aren’t clearly coordinated create confusion among the regulated community.”
