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In recent years, one of the retirement industry's white whaleshas been multiple employer plans (MEPs).  Countries likeAustralia have long allowed employers to participate in retirementsavings vehicles that are not sponsored by each individual employerbut that are instead sponsored by a third-party entity. Many academics, service providers, and employers haveviewed MEPs as a way to increase access and reform theretirement savings market by reducing the administrative burden onsmall employers that want to offer retirement plans and potentiallyoffering reduced costs to employees of small companies by allowingthem to take advantage of economies of scale in professionallymanaged plans.


With the passage of the SECURE Act, you may be consideringsponsoring this new type of MEP, the pooled employer plan(PEP).  If you are, there are five things to know now.

1. Who can participate in a PEP?

Any private employer can participate.  One of the majorchanges from prior multiple employer plan rules was the eliminationof a "commonality" requirement.  This major change couldallow PEPs to be designed that cover employers in variousindustries who are based in different parts of the country.

2. What do I have to do to become a pooled plan provider?

A pooled plan has to designate the pooled plan provider (PPP),and the pooled plan provider has to acknowledge that it is a namedfiduciary.  In addition, the PPP has to obtain an ERISAbond and register with the Department of Labor. Realistically though, a PPP also needs to draft and prepare apooled plan document and find employers who want to participate inthe PEP.

3. What is a pooled plan provider responsible for?

A PPP is a named fiduciary for a PEP and is responsible for planadministration.  Decisions about PEP investment optionsmay sit with the PPP, participating employers, or an entity who hasinvestment authority for the PPP.  In addition to planadministration, PPPs are responsible for ensuring that ERISA'sbonding requirements are met, filing an annual report to the DOL(which includes a list of participating employers), and respondingto any DOL audit or investigation.


Participating employers are still responsible for monitoring thePPP.  This could create a line of service for consultantsand others – helping employers select and monitor PEPs andPPPs.

4. What has to go into a PEP document?

It has to explain the different roles for entities – this meansdesignating the pooled plan provider, designating one or moretrustees who are responsible for collecting contributions andholding assets (a significant requirement), and making clear thatparticipating employers retain fiduciary responsibility formonitoring the pooled plan provider (and for decisions aboutinvestment funds unless that responsibility is delegated ).


It must also contain language stating that certain disclosureswill be provided and that participating employers agree to takeactions necessary for compliance with tax laws.


Additionally, the plan document cannot impose unreasonable feesor penalties if employers cease to participate or if funds aretransferred from the PEP.


The IRS has been directed to release model plan documentlanguage for PEPs.

5. Will the rules change?

Yes.  The DOL was directed to issue guidanceidentifying administrative and other duties of pooled planproviders.  These duties will include following certainprocedures for kicking out employers who fail to comply with taxrules or fail to meet other requirements.  These dutiescould be a big deal though depending on what standards the DOLestablishes in its guidance.


To provide some comfort, the SECURE Act provides relief for PPPswho comply in good faith before the DOL issues its guidance.


Kevin Walsh is a principal atthe Groom Law Group. He advises clients on a wide range of"standard of care" matters. His practice encompasses helpingretirement plan service providers, including registered investmentadvisers and broker-dealers, comply with the Department of Labor'sfiduciary rules, the Securities Exchange Commission's best interestrules, FINRA's suitability rules, and evolving state carestandards.


David N. Levine is a principal at theGroom Law Group, where he advises plan sponsors, advisers, andother service providers on a wide range of employee benefitmatters, including retirement. He was previously the chair of theIRS Advisory Committee on Tax Exempt and Government Entities and iscurrently a member of the executive committee of the DefinedContribution Institutional Investment Association.

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