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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.
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