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 relief offered by MEP participation is extensive but not total. Certain responsibilities generally remain with the adopting employer, and even this reduced role must be taken seriously.
Those responsibilities include:
• The need to make timely and accurate plan contributions.
• Plan design decisions, such as the level of match.
• The decision to adopt or de-adopt the MEP, including necessary due diligence and monitoring of the MEP.
• Distribution to participants of required notices and information, though this may at times be handled directly by the MEP plan sponsor.
• Communication and enrollment assistance for participants.
This may be a solution for companies which do have the time or desire to properly manage their company sponsored retirement plan.
Please comment or call to discuss how this could help your company.
- MEPs: The Rumors, The Facts, and Buying in Bulk (401kplanadvisors.com)
- Multiple Employer Plans – an enticing alternative for plan sponsors. (401kplanadvisors.com)
- Borzi vows to keep IRAs in Labor’s revamped fiduciary proposal (401kplanadvisors.com)