Pub. 2 2011 Issue 4

winter 2011 9 One of the most compelling trends in the defined contribution industry today is the increased use of multiple employer plans. Historically, the greatest number of workers without retirement plan coverage are those who work for small businesses. Retirement plan management for these companies is an administratively burdensome prospect. Lack of in-house benefits expertise, coupled with the fiduciary and legal issues surrounding a complex regulatory environment often make it difficult for small employers to spon- sor a plan. Yet lack of benefits are often cited as a reason for high turnover among small businesses, with employees leaving these jobs for positions with organizations that offer more comprehensive benefits pack- ages. Multiple employer plans offer an ideal solution to these challenges and address the complexities these businesses face in offering a retirement plan. MEPs are not a new concept—these plans have been in existence for many years. What has changed, and why is there renewed interest in these programs? Today, fewer employers sponsor defined benefit pension plans. With small busi- Trends in the Defined Contribution Industry — Multiple Employer Plans By Mark Hogan, Regional Marketing Director, Pentegra Retirement Services nesses expected to generate the greatest percentage of job growth in the future, the need for retirement plan coverage for employees of these businesses takes on even greater urgency. HOWDOES AMEPWORK? AMultiple Employer Plan, or “MEP”, is a retirement plan that covers employers that are not commonly owned. These employers each become “Adopting Employers” when they elect to join the MEP. These plans can be Defined Contribution (DC) or Defined Benefit (DB) plans. Section 413(c) of the Internal Revenue Code and the regulations thereunder estab- lish guidelines for Multiple Employer Plans. AMEP is essentially a single qualified trust established by the plan sponsor that allows unrelated co-adopters to adopt the plan. Under a MEP, each adopting employer can maintain an individual plan design. Compliance testing is also performed on an individual basis for each adopter, but only a single Form 5500 is filed for all participat- ing employers under a multiple employer plan arrangement. There are significant advantages gained by participating in a MEP, including: • Elimination of primary fiduciary responsibility • Investment fiduciary protection—relief of responsibility for selecting and monitoring plan investments • Economies of scale in the form of buying power of a single large plan vs. smaller plans and greater negotiating power when buying investment and other plan services • Cost savings • Elimination of need for annual plan audit and 5500 filing for individual employers; only a single plan document is maintained • Single source solution for plan services • Ease of use for small businesses ADMINISTRATIVE EASE MEPs deliver administrative ease for em- ployers, as nearly all of the administrative tasks relating to the Adopting Employer’s plan can be shifted to the Plan Sponsor. With a single plan document that partici- pating employers adopt on an individual basis, a multiple employer plan approach also eliminates the need for individual plan audits and government filings, including individual Form 5500s. Typically, MEPs provide the adopting employer with a comprehensive package of plan services. These services often include plan design and document support, plan consulting, administration and recordkeep- ing, legal and technical support, regulatory compliance and government reporting, investment management, fiduciary protection, and sponsor and participant communications. Because administration is streamlined, participating employers can also realize significant economies of scale that may result in lower plan costs.