Citing a critical need to expand access to workplace retirement plans in order to help more American workers financially prepare to retire, the U.S. Department of Labor (DOL) on July 31, 2019, published its Final Rule clarifying the circumstances under which an employer group or association or a professional employer organization (PEO) could sponsor a multiple-employer workplace retirement plan (MEP).
Under the Final Rule, a bona fide group or association of employers (e.g., a chamber of commerce) or professional employer organization would be able to serve as the sponsor of a pension plan, within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
To qualify as a bona fide group or association or professional employer organization under the Final Rule, a number of requirements related to the bona fide purpose of the organization, participation by employer members and control must be present. In addition, a bona fide group or association must also meet a commonality of interest test in order to qualify. The commonality of interest test is the same as the commonality of interest test set forth in the final rule for association health plans. (See Holland & Knight's alert, "U.S. Department of Labor Releases Association Health Plan Regulations," June 22, 2018.)
Finally, as was the case with association health plans, the Final Rule makes it clear that "working owners" may also participate in a MEP. The working owner definition for purposes of a MEP is the same as the "working owner" definition for association health plans that was described more fully in Holland & Knight's June 2018 alert.
The Final Rule is effective on Sept. 30, 2019.
In connection with the Final Rule, the DOL also published a document seeking comments on whether to amend regulations to facilitate the sponsorship of "open multiple-employer plans" (Open MEPs). The request for information stemmed from responses received by the Department in connection with the Final Rule. In the request for information, the Department is seeking comments on 17 specific questions regarding:
Comments in response to the request for information are due on or before Oct. 29, 2019.
The Final Rule does not answer every question and, as noted by the Request for Information, there are still a number of questions outstanding about MEPs and particularly Open MEPs, including those about disclosure and compliance. In addition, there are questions about fiduciary responsibility and each individual employer's fiduciary liability, plan governance issues, risks involved in the event that an employer desires to leave the MEP and costs for administering such an arrangement.
Finally, while it appears as though a majority of the MEPs will be set up as 401(k) plans, the Final Rule applies to all "employee pension benefit plans" established under Section 3(2) of ERISA, which means that it could apply to non-401(k) plan arrangements, such as employee stock ownership plans (ESOPs). However, one would have to review all of the rules applicable to such an arrangement to see if an ESOP could be established as a MEP.
For more information about MEPs and other information contained in this alert, please contact Partner Christopher Buch or another member of Holland & Knight's Employee Benefits and Executive Compensation Group, including Partners Bob Friedman, Ari Alvarez, Kelly Bley, Gregory Brown, Kerry Halpern, Claudia Hinsch, John Martini, David Pardys, Rachel Shim and Victoria Zerjav.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.
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