October 04, 2012
multiple employer plans (MEPs) have been touted as a solution to expanding
retirement plan coverage for Americans, the Government Accountability Office
(GAO) explored this option. ---
Overall, among MEP representatives and pension experts,
there was no consensus on whether or not open MEPs or PEO-sponsored MEPs could
substantially expand pension coverage.
GAO’s analysis of 2009 plan-level data shows that the bulk
of MEP participants and assets resided in the largest 25 private-sector MEPs.
Three major sponsor types emerged among the top 25 plans: large corporations,
associations and professional employer organizations (PEO), which are firms
that provide payroll and other human resources services to clients. These
sponsor types differ in various ways, but notably, associations and PEO
sponsors GAO interviewed tended to have a large number of employers participating
in their plans.
Little is also known about a fourth category of sponsor type
called “open” MEPs, an MEP in which employers in the plan share no common
relationship or affiliation with the other employers in the plan. This sponsor
type appears to have come about in response to 2002 Internal Revenue Service
(IRS) guidance that allowed certain PEOs to avoid tax disqualification of their
pension plans if they were converted to MEPs. Soon after this guidance was
issued, practitioners began offering open MEPs.
MEPs are marketed as providing several employer advantages
over single-employer plans, but GAO found that these advantages may not always
be unique to MEPs. MEPs are marketed as providing reduced fiduciary liability,
administrative responsibility and cost. However, other types of single-employer
plans may also offer reduced fiduciary responsibility and third-party
administrators can reduce administrative responsibilities.