Looking for a retirement plan that takes the hassle out of administration and compliance? Multiple Employer Plans (MEPs) may be the answer for you. This turnkey solution offers retirement planning power to employers who struggle to provide robust benefits to their employees, but what exactly is it? Let’s break down the complexities of MEPs and explore how this dynamic option simplifies retirement planning.
What are Multiple Employer Plans?
Multiple Employer Plans (MEPs) are retirement plans that enable unrelated employers to pool their resources and offer a single retirement plan to their employees. By joining forces, these employers can achieve economies of scale and potential cost savings that may not be otherwise feasible.
Different Types of Multiple Employer Plans
There are several types of MEPs available to employers, each with its own unique characteristics and benefits. Some common types include:
Open MEPs now known as PEPs: These plans allow employers from various, unrelated industries to join and participate, offering flexibility and the potential for greater cost savings.
Closed MEPs: Closed MEPs are restricted to specific industries or employer associations. They offer the advantage of specialization and tailored benefits for the participating employers and employees.
Association Retirement Plans (ARPs): ARPs enable small employers to join forces through their association memberships and establish a retirement plan. These plans were made more accessible through recent regulatory changes, providing greater retirement savings opportunities for small businesses.
How do MEPs/PEPs Work?
Governed by ERISA (Employee Retirement Income Security Act) and IRS (Internal Revenue Service) regulations, multiple employer plans are sponsored by any of the following:
Employee associations
Professional Employer Organizations (PEOs)
Pooled Plan Provider (PPP)
Board of Directors
Co-sponsorship
As with any retirement plan, MEP/PEP sponsors have fiduciary responsibilities and requirements. These obligations include acting solely in the best interests of the plan participants, diversifying plan investments, paying reasonable plan expenses, and following the plan's terms and provisions. Failure to adhere to these responsibilities results in legal repercussions. Luckily, one of the primary benefits of a MEP or PEP is the ability for participating employers to outsource many of the administrative and fiduciary responsibilities to a third-party administrator (TPA). This helps to relieve the administrative burden on individual sponsors, allowing them to focus on their core business operations.
Don't Confuse Multiple Employer Plans with Multiemployer Plans
Despite sounding similar, Multiple Employer Plans and Multiemployer Plans are not the same.
It's important not to confuse Multiple Employer Plans (MEPs) with Multiemployer Plans (MEPPs). While both involve multiple employers and provide retirement benefits, they differ in significant ways. MEPPs, also referred to as Taft-Hartley plans, are commonly found in industries with a significant number of unionized employees, such as construction and transportation. Participating employers in MEPPs generally have a collective bargaining relationship with unions, and the plan's governance and administration are negotiated between the employers and the unions.
RPCSI: Helping Sponsors with Multiple Employer Plans
MEPs and PEPs offer a streamlined solution to take care of most of the administrative and compliance responsibilities. With a CEFEX-certified TPA at the helm, MEPs and PEPs ensure ease of management, record-keeping, and reducing potential liabilities. It's a cost-effective, efficient solution for businesses looking to provide their employees with a quality retirement plan and alleviate the burden of plan management.
Sometimes these plans sound appealing, but once an analysis is completed it may be determined that sponsoring your own plan is more flexible, not as costly (if under 100 lives) and can be just as streamlined as a MEP/PEP when you partner with a qualified third-party administrator. Take time to review and consider all the retirement plan options available to determine the best option to fit your specific needs.
Learn more about RPCSI’s comprehensive annual administrative services as we help businesses achieve their retirement goals.
