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Retirement Planning > Retirement Investing

DOL Issues Final Rule on Association Retirement Plans

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The Labor Department on July 29 issued final rules to help small businesses offer retirement plans to their workers via association retirement plans.

Preston Rutledge, assistant secretary for Labor’s Employee Benefits Security Administration, said on a press call that in addition to the final rule, Labor has issued a request for information on other kinds of multiple employer plans.

“The purpose of this rule and the reason we wrote this rule is because there are a lot of smaller employers in particular that would like to set up a 401(k) plan for their workers, but they don’t for a number of reasons. One is expense; probably an even larger problem of concern to a smaller employer is the administrative [duties], the paperwork and the IRS filings that go along with offering a 401(k).”

Due to the lack of small businesses offering 401(k) plans, “there are around 38 million employees of smaller and midsized employers that are not covered by a 401(k) at work,” Rutledge said.

Labor issued the proposed rule last October. The effective date for the final rule is Sept. 30. The rule basically allows an association — for example, a local chamber of commerce — to set up a 401(k), Rutledge explained. The association will be running the 401(k) on behalf of the employers.

Another benefit, Rutledge said, “is a much larger pool of assets under management; a situation like this more assets means lower fees; lower fees means your account balances grow.”

The other kind of multiple employer plan in the final rule is the multiple employer plan run by a professional employee organization, or PEO, Rutledge said.

Rutledge also noted that Labor’s rule “meshes” with the Secure Act retirement bill that’s currently tied up in the Senate.

Washington Bureau Chief Melanie Waddell can be reached at [email protected].


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