illustration of tiny people scattered around one person (Photo: Shutterstock)

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One provision in the currently-debated Setting Every Community Up for RetirementEnhancement (SECURE) Act concerns Open Multiple Employer Plans,but while such MEPs present an opportunity for some small businesses, a newwhite paper from Massachusetts Mutual Life Insurance Company warnsthat they aren't the answer for everyone.

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The white paper, Open Multiple Employer Plans: What Open MEPs May Mean forYour Business, points out that plan design options may belimited under the proposed legislation, since one of the bill'spurposes is to streamline the process of offering and maintaining aretirement plan.

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That could mean that such a plan may not be as effective inenrolling employees, encouraging savings and getting workers readyto retire "on their own terms."

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In addition, another issue to be considered is whether to followa hands-on or hands-off approach to plan administration. Joiningwith other companies to offer a plan may mean that the group's useof a third-party administrator would be most helpful in handlingall the intricacies of such a plan without the need for smallbusinesses to get down in the weeds to make it work.

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There may also be limitations on the investment choice menu,since ease of administration could require more limited optionsthan could be available otherwise—but being able to combine assetsinto a single MEP could also allow the plan to take advantages ofeconomies of scale and gain access to "lower-cost funds typicallyavailable only to larger companies with greater assets and morepurchasing power."

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With a MEP, fiduciary oversight can be handed over to a 3(38)investment manager, rather than a 3(21) fiduciary service, whichactually leaves employers still on the hook for discretion,authority and fiduciary liability for fund selection.

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Taking all these things into consideration, small companies willhave to decide whether participating in a MEP will provide morebenefit than handicap, based on their individual circumstances.

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"Open MEPs could expand access to retirement planssignificantly," says Bob Carroll, head of workplace distributionfor MassMutual, "But it ultimately pays to understand how to makethe most of the available opportunities, especially when it comesto joining an Open MEP."

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.