The Employee Benefits Security Administration (EBSA) has given life insurers, and other financial services companies, an early Christmas present: an expression of interest in the idea of letting financial institutions start multiple-employer retirement plans.
EBSA has just helped its parent, the U.S. Department of Labor (DOL), complete work on a set of final regulations that encourage small employers to offer association retirement plans — by treating small employers that join a multiple-employer plan (MEP) as one big employer, for some federal retirement plan regulation purposes.
Now, EBSA is seeking comments on a related idea: letting life insurers and other commercial entities start independent, open MEPs, separate from any other association or trade group.
The idea is that a financial institution’s open MEP could simply offer a large number of small employers the ability to offer a pooled defined contribution retirement plan, without the small employers having to attend more annual conventions, participate in more fundraising drives for worthy causes, or participate in more grassroots public awareness campaigns simply to get access to the pooled retirement plan program.
EBSA officials say DOL is organizing a request for information about the financial institution MEP concepts in response to comments on the draft version of the new MEP regulation.
“After reviewing the comments, the department is persuaded that open MEPs deserve further consideration,” officials say in the introduction to the new request for information. “The departmentdoes not believe that it has acquired a sufficient public record on, or a thorough understanding of, the complete range of issues presented by the topic.”
The request for comments is set to appear in the Federal Register Wednesday.
Comments on the open MEP concept will be due 90 days after the official notice publication date.
Financial Services Company Open MEPs
The general idea behind the MEP concept is that a big employer can get a better deal on defined contribution retirement plan services than a small employer can. So, why not make it easy for small employers to team up?
Employers that have joined together to offer traditional, multiple-employer defined benefit pension plans have had problems with solvency.
Employers that have formed multiple-employer health plans, under the old rules, have also had solvency problems.
Supporters of the financial services company MEP association retirement plan concept have argued that a MEP is a much different.
A financial services company MEP would have to collect employer and employee contributions, manage pooled assets, and keep the assets safe, concept supporters say.