Meaningful Multiple Employer Plan Minutiae

Multiple Employer Plans have been given a bad rap by the financial institutions. The implementation of a MEP would allow more Americans to an affordable retireement plan. This would result in the end of the cash cow for the financial industry.

WASHINGTON - OCTOBER 26:  Internal Revenue Ser...
WASHINGTON - OCTOBER 26: Internal Revenue Service Commissioner Douglas Shulman addresses the American Institute of Certified Public Accountants' 35th Annual National Tax Conference October 26, 2010 in Washington, DC. Shulman addressed a new IRS program requiring that anyone making money from completing tax returns must register with the IRS, pay a fee and pass competency tests and eventually attend continuing education programs. (Image credit: Getty Images via @daylife)

One bad apple.  One of the risks in adopting a MEP is that, under IRS rules, a single bad plan can disqualify the entire MEP. What minutiae is critical here, though, is Section 10.12 of EPCRS (the IRS’s correction programs): a MEP which has a violating plan sponsor is fixed by fixing only the broken portion of the MEP (of course), but the Plan Administrator may elect to have the compliance fee or sanction based only upon the offending plan, not based on the entire arrangement; while 14.03 permits similar treatment for “tainted” assets transferred into the plan from an offending plan (if the offense does not continue). As a practical matter, this means the risk of an economic catastrophe from a single employerdisqualifying an entire MEP can be cost effectively managed. 

This clears up one of the concerns when becoming an adopting employer in a multiple employer plan.

Please comment or call to discuss how this could affect you and your company’s decision to join a MEP.

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