Harkening back to a brief reference to benefit portability in the State of the Union address, the Obama administration has announced its desire to extend Multiple Employer Plan (MEP) access to the private sector.
These so-called “open” MEPs are single retirement plans involving two or more unrelated employers. In announcing a series of retirement-related initiatives, the White House said it was “proposing legislation to allow multiple unrelated employers to come together and form pooled 401(k)s, resulting in lower costs and less burden for each employer.” The announcement, in the form of a post on the White House blog, said that as a result (and as proponents of open MEPs have long claimed), “more small businesses should be able to offer cost-effective plans to their employees, while certain nonprofits and other intermediaries could create pooled plans for contractors and other self-employed workers.”
Portability was the underlying theme for the initiative (“Their careers may be mobile, but too often their retirement accounts and savings are not”), and the announcement explained that the expanded capability “would also allow employees moving between employers participating in the same open MEP to continue contributing to the same plan — and receiving employer contributions — even if they switch jobs.” Additionally, independent contractors participating in a pooled plan using that structure could contribute regardless of which client is paying them.
However, open MEP proponents shouldn’t uncork those champagne bottles just yet. While the announcement references the administration’s intent to “propose legislation” on open MEPs, that responsibility lies with Congress. That said, the MEP concept has enjoyed bipartisan support on Capitol Hill, and there have been a number of bills introduced that include it, notably Senate Finance Committee Chairman Sen. Orrin Hatch’s SAFE Retirement Act, the Small Businesses Add Value for Employees (SAVE) Act of 2014 (H.R. 5875) sponsored by Reps. Ron Kind (D-Wis.) and Dave Reichert (R-Wash.), and last year Sens. Susan Collins (R-Maine) and Bill Nelson (D-Fla.) introduced the Retirement Security Act of 2015 (S. 266), as did Reps. Vern Buchanan (R-Fla) and Ron Kind (D-Wisc.) in the House of Representatives (H.R. 577). It’s also a topic for a Senate Finance Committee hearing scheduled for later this week on “Helping Americans Prepare for Retirement: Increasing Access, Participation and Coverage in Retirement Savings Plans.”
Change of Heart?
Receptivity to the concept of an open MEP is something of a turnabout for the Labor Department, which has previously said that for retirement plans, participating employers must share a common employment-based nexus or other genuine organizational relationship beyond that of providing benefits. However, in crafting recent guidance on state-run retirement plans, the DOL sanctioned the open MEP concept for those programs, acknowledging (some might say “creating”) what it termed a “unique representational interest” between a state and its citizenry that it found sufficient to permit participation in a MEP by otherwise unrelated employers. This, of course, effectively put state governments in the business of promoting so-called “open” MEPs, or multiple employer plans, in competition with the retirement plan providers in their own state.
Other Retirement Initiatives
The announcement also cited President Obama’s intention to propose a new program that will provide grants to states and nonprofits to “test innovative, more portable approaches to providing retirement and other employment-based benefits.” The White House blog post said that the goal of this program is “to encourage development of new models that are portable across employers and can accommodate contributions from multiple employers for an individual worker or independent contractor, as well as contributions from individuals whose work patterns don’t provide reliable amounts of income each month.”
The blog post, by Secretary of Labor Thomas Perez and Director of the National Economic Council and Assistant to the President for Economic Policy Jeffrey Zientz, laid out a number of initiatives to be included in the White House budget, including the perennial call for a federal automatic IRA, as well as providing tax credits to encourage small businesses to offer plans and automatically enroll workers in those plans, and extension of plan eligibility to long-term, part-time workers.
The post also referenced other retirement coverage initiatives, including the aforementioned guidance facilitating state efforts to create their own retirement savings plans, the relaunch of myRA accounts and guidance from Treasury and the IRS making it easier to roll over and consolidate savings between 401(k)s, as well as the DOL’s pending fiduciary rule.