Following a directive from President Donald Trump, the Labor Department on Monday announced a proposed rulemaking designed to make it easier for small businesses to offer retirement savings plans to their workers through association retirement plans, often referred to as multiple-employer plans, or MEPs.
Trump signed an executive order on Sept. 5 during a visit to Charlotte, North Carolina, under a banner reading “Securing Americans’ Retirement,” directing Labor to ease rules on small-business MEPs and also instructing the Treasury Department to review required minimum distributions, or RMDs, from 401(k)s and IRAs.
Labor Secretary Alexander Acosta said during a Monday afternoon call with reporters that the proposal will help “close our nation’s retirement savings gap,” citing a recent Government Accountability Office report finding that only 14% of small employers offer retirement plans.
Acosta said two MEP approaches could be offered: Trade groups or associations of businesses could come together to offer them, or professional employer organizations such as those that currently provide payroll services to employers could band together to offer them.
“Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans,” Acosta said.
Association retirement plans “give these employers a simple and less burdensome way to offer valuable retirement benefits to their employees,” Acosta added. “The proposed rule helps working Americans — and their families — take care of themselves in their retirement years.”
Under the proposed rule, association retirement plans could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide, Labor explained.
“Sole proprietors, as well as their families, would also be permitted to join such plans. In addition to association sponsors, the plans could also be sponsored through professional employer organizations,” which are human-resource companies that contractually assume certain employment responsibilities for their client employers.
By expressly permitting these new plan arrangements, the proposal would enable small businesses to offer benefit packages comparable to those offered by large employers.
IRA guru Ed Slott told ThinkAdvisor in a Monday email message that ”there are many small employers who would like to offer more comprehensive retirement plans for their employees and to attract new hires, but the costs, compliance and paperwork requirements to implement their own company plans were overwhelming and deterred them. They were also worried about liability.”
With groups of small businesses banding together, Slott continued, “much of that cost and paperwork can be streamlined and simplified. I believe [Labor's MEP plan] would encourage many more small companies to offer their employees the retirement plans they always wanted to. These companies are competing for employees. Offering a company retirement plan is something many more small companies would jump on if the process can be simplified and the costs contained. Everyone wins here.”
Robin Traxler, vice president of advocacy policy & associate general counsel at the Financial Services Institute, said that while FSI is “still reviewing the details of the proposal,” the trade group “shares the administration’s desire to promote retirement security for Main Street Americans, and we look forward to working with them to further this important goal.”