Multiple Employer Plans (MEPs)

Definition

Multiple Employer Plans (MEPs) are retirement plans that are established by multiple employers to provide benefits to their employees, pooling resources for administrative efficiency and cost savings. These plans allow different businesses, often within the same industry or association, to participate in a single retirement plan, making it easier for smaller employers to offer competitive retirement benefits. MEPs can be qualified or non-qualified plans, impacting their tax treatment and regulatory requirements.

5 Must Know Facts For Your Next Test

1. MEPs can provide significant cost savings due to shared administrative expenses among participating employers, making them attractive for small businesses.
2. There are two main types of MEPs: fully pooled plans, where employers have no separate accounts, and single-employer plans that can still benefit from collective administration.
3. The SECURE Act of 2019 expanded the use of MEPs by allowing unrelated employers to join together in a single plan, promoting greater access to retirement savings options.
4. Employers participating in MEPs typically benefit from reduced fiduciary liability compared to single-employer plans, as the responsibility can be shared among all participating employers.
5. MEPs must comply with ERISA regulations and can be subject to different reporting and disclosure requirements depending on whether they are classified as qualified or non-qualified plans.

Review Questions

• How do Multiple Employer Plans (MEPs) enhance retirement savings options for small businesses?
  • Multiple Employer Plans (MEPs) enable small businesses to pool resources and share administrative costs, which can lower the barriers to providing competitive retirement benefits. By participating in a MEP, smaller employers gain access to economies of scale that would be difficult to achieve individually. This not only enhances their ability to offer retirement plans but also allows them to attract and retain employees who value these benefits.
• Discuss the implications of the SECURE Act of 2019 on the establishment and operation of Multiple Employer Plans (MEPs).
  • The SECURE Act of 2019 significantly changed the landscape for Multiple Employer Plans (MEPs) by allowing unrelated employers to join together in a single plan. This provision encourages more small businesses to participate in MEPs, thus expanding access to retirement savings options for their employees. Additionally, it simplifies plan administration and compliance, making it more appealing for small employers who may lack the resources for individual plans.
• Evaluate the potential advantages and challenges faced by employers participating in Multiple Employer Plans (MEPs).
  • Employers participating in Multiple Employer Plans (MEPs) can benefit from reduced administrative costs, shared fiduciary responsibilities, and greater access to retirement savings options for their employees. However, challenges include navigating complex regulatory requirements and ensuring that all participating employers maintain compliance with ERISA guidelines. Additionally, there is a potential risk associated with the financial health of other employers in the plan that could impact benefits if not properly managed.

Related terms

401(k) Plan: A 401(k) Plan is a qualified employer-sponsored retirement savings plan that allows employees to save for retirement while deferring income taxes on the saved money until withdrawal.

Defined Benefit Plan: A Defined Benefit Plan is a type of retirement plan where an employer guarantees a specified pension payment upon retirement, based on factors such as salary and years of service.

Association Retirement Plan: An Association Retirement Plan is a retirement plan offered by a group of employers who belong to a common association, allowing them to pool resources and share administrative costs.