DOL Issues Guidance on Association Multiple Employer Plans

New regulations from the Department of Labor (DOL) regarding Multiple Employer Plans (MEPs) are set to take effect later this year. Specifically, they outline three different types of MEPs and how the DOL will look at the unrelated businesses banding together to form the MEP. In particular, Association MEPs (also called Association Retirement Plans) are of interest to many employers, as they arise for a “bona fide group or association” of employers. In order to form an Association MEP, your plan must meet the following four criteria.

  1. Formal Organizational Structure: This requirement states that the group of businesses coming together to form the association must have some “indications of formality” such as bylaws, a governing body, or some other substantive structure that governs the member businesses.
  2. Substantial Business Purpose: The second requirement indicates that the association should have a business purpose that is substantial and not related to providing benefits to the organization. In other words, an association cannot be a group that has simply joined together in order to sell benefit plans. While benefits can be the primary purpose of the organization and a substantial part of its operations, it cannot be the only significant purpose. The proposed test for this element is whether the association would still have viable operations if it did not offer benefit plans.
  3. The Association Cannot be a Financial Services Firm: The association formed by the businesses cannot be a bank, a trust company, a broker-dealer, insurance company, or any other form of financial services firm. Nor can the association be owned or controlled by a financial services firm. The DOL does not want such entities to be able to sponsor MEPs.
  4. The EmployerMembers of the Association Must Control the Organization: The employers who formed and are members of the association must be able to control it in both form and substance. While this isn’t construed to mean they must manage the day-to-day operations, the members must oversee those operations, engage in nominating and electing a governing body, and have the authority to remove those on the governing body.

There are also requirements that the plan itself must meet in order to be a valid Association MEP. This includes the rule that a member must have at least one eligible employee in order to benefit from the MEP. Owner-only companies have their own set of requirements to meet in order to be eligible to join the MEP. There must also be some thread of commonality that binds these businesses together. In the past, this was a much more stringent requirement, whereas now geography and industry can serve to meet the commonality requirement.

These new regulations open up the world of Association MEPs to a wide variety of businesses as an option for meeting their employee benefits needs. The attorneys at Hall Benefits Law pay attention to changes in regulations so we can ensure client benefit plans comply with the law and make useful recommendations to new and existing clients based on the changes. To learn more, reach out today by calling 678-439-6236, or visit the Hall Benefits Law website.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.
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