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If you haven't been paying attention, then you must bepreoccupied with something else. And that's too bad, becausethere's a good chance history is about to be made.

The SECURE Act promises to change the retirementindustry paradigm. It will alter decades-old IRA strategies. Thesewill be a death-by-a-thousand cuts kind of change, involving many,many small (and not so small) accounts.

But the bigger change has the potential to start more people onthe road to a comfortable retirement than ever. The SECURE Act isexpected to encourage the widespread use of 401(k) MEPs. And thatwill change even how current plan sponsors view their own 401(k)plans (see "To MEP Or Not To MEP? That is the SECURE 401kQuestion," FiduciaryNews.com, December 17, 2019).

Are you prepared for the coming MEP tsunami? Do you know yourins-and-outs?

For quite some time now, the 401(k) MEP has existed in a nebulous limboas far as the vast majority of plan sponsors and their serviceproviders have been concerned. There's a good reason for this.Because of regulatory tentativeness, MEPs occupied a very thin linesomewhere between "legal" and "don't go there."

Very soon, they may be simply "groundbreaking."

They are, however, not without risk. There are plenty offiduciary issues surrounding 401(k) MEPs, especially the openvariety (where service providers rather than independent tradeassociations could act as plan sponsors).

What do you need to know to get up to speed quickly on MEPs?Let's break it down into three primary components (or maybe four,depending on how you're counting).

1. Plan design

Probably most important is the plan design element. This isprimarily the purview of the ERISA attorney. Since a 401(k) MEP is,at its very essence, a pooled retirement plan, in its simplest formall participating companies might have to select the same plandesign options.

There is some wiggle room and there are alternatives should youneed to wiggle more than the room allows. That's why this is atopic for an ERISA attorney, not a journalist.

2. Plan operations

The second area that requires strict consideration deals withplan operations. This is the realm of the recordkeeper.Traditionally, in stand-alone 401(k) plans, recordkeepers have theluxury of isolating plan operations. Each 401(k) plan, whilemaintained on the same software system, is separate from everyother plan. If there's a recordkeeping issue with one plan, it hasno bearing on any other plan.

It doesn't work that way with 401(k) MEPs. Recordkeepers, ifthey want to be competitive, will need to now only run multiplecompanies under one system, but also accommodate multiple payrollprocessors, bank accounts, and, potentially, custodians.

That's a lot of balls to juggle in the air all at once.

Granted, experienced recordkeepers already do this. But, do youknow who already does this? Bundled providers. We thought we solvedthe fiduciary conundrum of bundled providers years ago. We may haveto revisit the concept as 401(k) MEPs grow more popular.

3. Plan advisors

Finally, we have the category of service providers perhaps bestknown (and most written about) component. This would be theinvestment adviser.

Actually, it could be investment advisers – plural.

This is a twist we're likely to see in 401(k) MEPs (because itmakes a lot of sense on any number of levels).

We could have a plan-level fiduciary adviser. This providerwould oversee plan investments and report directly to the plansponsor.

On a different level, we can have company-level investmentadvisers/financial planners. These providers, potentially one forevery participating company, would report to the individualcompany. They would be responsible for traditional employeeeducation (and therefore must be on the same page as the plan-levelfiduciary adviser). They could also offer personal one-on-onefinancial planning advice to individual participants.

In fact, don't be surprised if we see the retirement planadviser market evolve the same way the retail adviser market hasevolved.

In the latter case, we've seen a separation between advisers whofocused on institutional level portfolio management (i.e., mutualfunds) and advisers who used the products of those institutionaladvisers and concentrated on retail-level financial planning.

In a similar manner, the retirement plan adviser market willhave institutional advisers (plan-level fiduciaries) whoretail advisers will work with to advise employees of participatingcompanies.

What are you doing to get ready for the watershed event ofuniversal 401(k) MEPs?

READ MORE:

• MEP components: Where do you fit? —Carosa
• Impact and opportunities in the SECUREAct
• 401(k) MEP: Panacea or placebo? —Carosa