Employer Retirement Plan Platform Overload: MEPs, PEPs, and Single Employer Plans

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) established a new retirement plan platform – Pooled Employer Plans (PEPs) – whereby a group of unrelated employers could participate in a single defined contribution plan as of January 1, 2021. This adds a new retirement plan option for employers to consider among other existing plan options that include the following:

Single Employer Plans

A single employer plan is created and maintained by one company or a number of closely related entities (e.g., subsidiaries). In a single employer plan, the plan sponsor controls the design of the plan and investment options that provide the best benefit to the plan’s participants. The plan sponsor also has free rein in choosing the service providers to administer the plan that are the best fit for the company.

Multiple Employer Plans (MEPs)

MEPs allow unrelated employers that would otherwise be too small to access competitive benefits packages to band together in order to offer various benefits to employees. Employers can group together to achieve the needed economies of scale to negotiate better rates and reduce administrative costs of organizing the plans. Previously, there needed to be some “nexus” between the employers in the group; now they can simply belong to the same industry or work in a similar geographic area.

Professional Employer Organization (PEO) and Association MEPs

In 2019, the DOL issued new regulations allowing Professional Employer Organizations (PEOs) and Associations to sponsor MEPs. To participate in a PEO MEP, a company must be a client of the PEO and the PEO must be providing significant employment roles to the company beyond being a plan sponsor. To participate in an Association MEP, a company must be a member of the association and the association must serve at minimum one substantial business purpose beyond sponsoring the plan. The PEO or Association designs and controls the plan and selects service providers.

Open MEPs

In 2012, a DOL Advisory Opinion stated that an Open MEP is not really a MEP at all. Instead, Open MEPs are groups of separate single-employer plans with nothing more in common than that they share the same service provider(s). If there are more than 100 participants, then each company is required to file its own Form 5500. Since there is only one investment menu for the entire plan, the ability to customize a plan is minimal.

Pooled Employer Plans (PEPs) 

Pooled Employer Plans (PEPs) must be administered by a Pooled Plan Provider (PPP), which acts as the plan sponsor, handling all fiduciary, administrative, and investment responsibilities. Because of the highly specialized requirements for administering a PEP, the PPP role is more likely to be filled by registered investment advisors (RIAs), third-party administrators (TPAs), record keepers, and other financial services entities. Each employer that participates in a PEP will fill the role of plan administrator to that employer’s plan assets and participants, retaining the responsibility for funding the PEP with employer and employee contributions as well as providing plan participant information to the PPP and other service providers.

Exchanges

An Exchange is a collection of individual companies, each with its own plan, that share the same investment menu to realize economies of scale on investment costs. Each company is responsible for filing its own Form 5500.

Groups of Plans (GOPs)

Beginning January 1, 2022, certain groups of plans will be allowed to file a single Form 5500 as long as they share the same trustee, administrator, investment menu, named fiduciaries (one or more), and plan year beginning date. 

Because the distinctions between these various types of retirement plans and the requirements that apply to them are complicated, employers and plan participants will be best served by consulting with benefits legal counsel for guidance.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 678-439-6236.

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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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