(Photo: Mike Scarcella/ALM)

Now that the SECURE Act has passed out of the House andSenate and will become law once President Trumpsigns next year's spending package tomorrow, regulators will becalled on to facilitate implementation of the retirement bill's manyprovisions.

One of the most critical provisions of the law—the Open MultipleEmployer Plan provision—will allow unaffiliated employers to bandworkers under one defined contribution plan, creating economies ofscale and offloading much of the fiduciary liability that sponsorsof retirement plans carry today.

Open MEPs have the potential to revolutionize workplaceretirement plans, not only for the small employers that currentlydon't offer plans, but for existing plans as well, says MelissaKahn, managing director at State Street Global Advisors.

"The big immediate question is how can plan providersparticipate," said Kahn. "The Labor Department is going to have tocome up with some guidance on that."

This fall, Labor implemented a regulation on pooled retirementplans that did not include Open MEPs.

In its regulation, Labor prohibited money managers, insurancecompanies, recordkeepers, and advisors from sponsoring MEPs.

Under the SECURE Act, those entities and not prohibited fromsponsoring Open MEPs.

But that doesn't mean that they legally can—at least not withoutfurther clarification.

Under ERISA, fiduciaries to retirement plans are forbidden fromself-dealing. The question under SECURE's vision for Open MEPs iswhether a money manager like State Street can be a MEP sponsor, orif a recordkeeper that also has proprietary mutual funds orannuities can legally sponsor a pooled plan.

The Open MEP provision of SECURE is not slated to go into affectuntil January of 2021. Kahn says that will give the LaborDepartment all the time it needs to propose and finalize thenecessary guidance.

"I personally think Labor is already working on drafting new MEPregulations, or exemptions for service providers," said Kahn, whoreferenced a request for information on Open MEPs Labor issued whenit finalized its pooled plan rule.

Kahn thinks a proposal from Labor could come as early as thefirst quarter of next year. Presuming what it will look like isspeculative. She does not expect regulators to put cost limitationson Open MEPs, but they could require a third-party fiduciary tooversee the fiduciary sponsors of Open MEPs.

Will Open MEPs transform today's 401(k) market?

"SECURE is positioned in a way that is focused on smallemployers," said Kahn, noting a $5,000 tax credit SECURE createsfor employers to start sponsoring retirement plans that, in accordwith the economies of scale achieved through polling plans, couldmove the needle.

"It creates an opportunity for those employers that have notbeen able to afford sponsoring a plan—I think you will see advisersand MEP sponsors going to those employers and saying you can nowafford this," she said.

As Open MEPs have been floated over the years throughlegislative and regulatory channels, some have speculated thattheir impact would be more on the existing plan market, and notnecessarily on persuading small employers to start sponsoring aplan.

In other words, employers of all sizes that now sponsor plans,and carry considerable fiduciary liability in an era of aggressiveERISA litigation, may find Open MEPs a more appealing option.

Kahn acknowledges that possibility, and points to regulations inthe United Kingdom that required retirement plan sponsorship foremployers and created master trusts, which some larger employersare gravitating to.

"There are a lot of unknowns and none of us has a crystal ball.We will have a better idea of which direction the market may takeafter Labor releases regulations. But we live in such a litigioussociety—unlike any other developed economy. Employers want to befunders and facilitators of retirement benefits, but they don'twant the liability," explained Kahn.

"If they can offload that liability, they will," she added.

READ MORE:

• Impact and opportunities in the SECUREAct
• With or without SECURE Act, industryon the precipice of new evolution
• What the SECURE Act means for annuities in401(k)s