Multiple Employer Plans – an enticing alternative for plan sponsors.

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The multiple employer plan allows the plan sponsor to provide a retirement plan for their employees without all the fiduciary responsibilities. An additional benefit is that the employees have access to a prudent retirement plan which will allow them to successfully retire. That is if they utilize the plan as offered.

The MEP sets up a single plan that covers all adoptingemployers, with the plan document generally written to allow for variation in plan design among the participating companies. Fund selection and monitoring generally are handled by the MEP. Discrimination testing and plan design (with some limitations) generally remain with the adopting employer.The shift in responsibility results in several potential benefits:

Elimination of annual plan audit. Plans that cover more than 100 employees typically are required to have an annual plan audit performed as part of their annual plan Form 5500 filing. Under the MEP arrangement, there is still a plan audit, but only one that is performed at the overall MEP level. The annual audit that is required by each employer (now known as an “adopter”) is eliminated, resulting in significant savings to the employer.

Mitigation of fiduciary risk. Independent fiduciary W. Michael Montgomery described the impact on fiduciary liabilities in Multiple Employer Plans as a Fiduciary Risk Mitigation Tool:

Employers adopting a sound Multiple Employer Plan…achieve a profound reduction in fiduciary risk exposure. The reason is a simple one: The adopting employer ceases to perform certain key roles that incur fiduciary status. When an employer merges its current single-employer plan into a properly structured MEP, it is no longer the sponsor of the plan. It also should cease to be a trustee, plan administrator, or any sort of named fiduciary. Those central roles move to the MEP, and the inherent fiduciary liability transfers with them.”

The MEP is an excellent alternative for the employer that does not have the time or the desire to manage a compliant retirement plan for their employees. Outsourcing their fiduciary duties to professional fiduciaries can save time and money for employers.

Please comment or call to discuss how a MEP might work for your organization.

  • Fiduciary Revolution. (401kplanadvisors.com)
  • Is Your Company 401(k) Plan A Benefit? (401kplanadvisors.com)
  • ERISA §3(38) Fiduciaries and the Flavor of the Month (401kplanadvisors.com)
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