Ironically, one of the most popular provisions in the SECURE Act also turns out to be one of the most controversial among industry professionals.
Specifically, that’s the provision regarding “opening” multiple employer plans, or MEPs. Called Pooled Employer Plans (PEPs) in the SECURE Act, proponents have long maintained that the opening of this construct to any adopting employer would help close the current coverage gap, provide a more efficient means for more employers to offer a retirement plan (which would help close the coverage gap), provide additional ways for providers to (more profitably) serve that market (and thus to help close the coverage gap).
It’s why the American Retirement Association has – with some important conditions – supported the concept. Our recent comment letter to the Labor Department noted that these “open” MEPs “hold the potential to increase efficiencies, manage costs more effectively, reduce burdens on employers, and improve retirement outcomes for the American workforce,” and that extending the availability of MEPs is a positive development in expanding retirement plan coverage for working Americans.
However, while it is our belief that open MEPs could have a positive impact on closing the retirement plan coverage gap, it also has the potential to be a negative disruption for the current business models of many in our industry, notably TPAs and plan auditors, for whom the effective consolidation of multiple ERISA plans into one (as a MEP, one IRS Form 5500 Annual Report is filed, one ERISA fidelity bond purchased, and a single annual audit by an independent accountant conducted for the entire plan) could well diminish current revenue flows, as it reduces the number of individual plans to which they provide that support. And while it offers the potential to more effectively serve smaller plans, retirement plan advisors too see the potential for disintermediation of their business by the aggregation of current plans into a MEP-3(16) construct.
In a time in which there seems to be little bipartisan support for anything on Capitol Hill, MEPs stand out. There is, and has been, strong support on both sides of the aisle for the concept. The opportunities afforded by the design were acknowledged in President Trump’s 2018 admonition to the Labor Department to consider changes to the current boundaries, and that ultimately resulted in new regulations expanding Association Retirement Plans.
Read more commentary from Brian Graff here.
As you might expect, over the years (open MEPs are not exactly a new idea) we’ve had hours and hours of discussions with our members, plan sponsors, providers, advisors, as well as with regulators and legislators, to craft the best possible application of the open MEP concept to help expand workplace retirement plan access to the millions of working Americans who have now gone a generation without that opportunity. We’ve done that with both a sensitivity to the need for those solutions, as well as the potential disruption to the valuable support provided by our members.
We’ve fought for – and won – the retention of a fiduciary involvement by the plan sponsor in the selection and monitoring of the MEP provider, and we’ve continued to press for the Labor Department’s oversight role with regard to MEP providers, as well as “broad authority to conduct investigations and audits of open MEP service providers to protect plan participants from fraud and abuse.”
In the macro sense, competition in the marketplace ultimately will determine whether open MEPs are economically viable, and the DOL and the IRS will play a key role in mitigating the costs and complexities with respect to the expansion of open MEPs.
The American Retirement Association remains committed to creative ways to help close the retirement plan coverage gap, sheltered and supported by prudent oversight, fueled by private sector engagement and innovation. And, whatever interim disruptions in product or process may result from the expansion of open MEPs, I am confident that the committed professionals in our industry will not only survive, but thrive as we continue to find new ways to help build America’s retirement.
Brian H. Graff, Esq., APM, is the Executive Director of NAPA and the CEO of the American Retirement Association. This column appeared in the Winter issue of NAPA Net the Magazine.