SAN DIEGO – The best odds of passing legislation that would pave the way to more multiple-employer plans could lie in the huge transportation bill that expires in late spring, the moderator of a NAPA 401(k) Summit panel said Tuesday.
If that doesn't work, bipartisan legislation has already been filed in both chambers of Congress that would make it easier for small businesses to join MEPs. There's also more sweeping retirement legislation proposed by Sen. Orrin Hatch, R-Utah, that would encourage the wider use of MEPs.
Just which of these legislative approaches actually sticks remains to be seen. Either way, the aim is to get regulators to issue rules that would protect employers in a MEP should one of the other participating employers fail to comply with plan requirements.
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MEPs already allow employers that share a common "nexus" – typically a labor union – to pool participants in one savings plan. Under the changes sought by MEP advocates, that rule would be relaxed to allow employers in the same industry to join the same MEP. According to their advocates, "open" MEPs create cost and regulatory efficiencies otherwise not available to smaller, individual plan sponsors.
That point was met with some skepticism at the NAPA workshop Tuesday, with cautions raised about higher expenses that come with managing, monitoring and otherwise trying to meet fiduciary obligations for a plan with lots of different moving parts.
"You better have the alpha to overcome the cost," Greg Carpenter, founder of Employee Fiduciary, said.
Elaborating after the session, Carpenter noted that passive index funds in retirement plans have outperformed actively managed mutual funds for years now, suggesting that achieving the returns needed could be unrealistic.
While generally a supporter of MEPs, one of his co-panelists, employee benefits lawyer Robert Toth, also struck a cautious note. MEPS, he said during his presentation, are "tough to administer properly. You have to get the details right."
On the other hand, MEPs do allow the smallest of retirement plans to access investment manager services they might otherwise lack. And MEPs offer small employers a way to set up a plan for their employees with presumably less administrative muss and fuss.
Michael Montgomery, the CEO of Fidelis Fiduciary Management, offered a few tips to advisors considering adding MEPs to their practices, starting with the idea that they might be better off abandoning the idea unless they're truly qualified or prepared for the complexity of handling a MEP.
Beyond insurance requirements, it is "imperative" advisors incorporate an ERISA lawyer in their MEP work. "There always will be issues with adopting a MEP," he said.
In a move applauded by advocates, the ERISA Advisory Council last year urged the Department of Labor to consider designing sample structures for MEPs that address prohibited transactions, conflicts of interest and the question of individual employers' fiduciary role.
Just what the DOL ends up doing is up in the air, though it appears likely it is waiting for legislative action.
This week, the U.S. Conference of Mayors urged Congress to pass legislation to prevent a shutdown in transportation funding this summer. Lawmakers have been struggling to come up with a way to pay for an extension of the current transportation funding measure, which is scheduled to expire in May. And now, as moderator Terrance Power of The Platinum 401(k) noted, it may be the best hope for MEP advocates, too.
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