Some experts in the retirement planning industry think that if the executive order issued earlier this year to the Department of Labor (DOL) and the Treasury on expanding open multiple employer plans (MEPs) finds success, this could result in many more small businesses offering MEPs—which will in turn open up new opportunities for advisers.
“Even if there is only a marginal uptick, there will be more opportunities to serve multiple employer plans,” says Adam Pozek, chief financial officer of DWC—The 401(k) Experts, in Boston.
However, Karen Scheffler, senior Employee Retirement Income Security Act (ERISA) counsel at Alliance Bernstein, in New York, says the future of open MEPs may ultimately be determined by what happens legislatively.
“It depends on what the final legislation says with regard to MEPs,” Scheffler says. “If the common nexus and bad apple rules are eliminated, it reduces some of the disincentives to join these plans. However, there are other factors that will go into whether a small business owner will find open MEPs appealing. We don’t know what a recordkeeper will charge for this type of program. Also, the fiduciary liability relief has not been determined, and the complexity of these plans may make it difficult for an employer to know what they are selecting.”
Should open MEPs become more common, however, this will drive many opportunities for retirement plan advisers, Scheffler says. “Advisers will still have a significant role with regard to advising plan sponsors,” she says. “While MEPs simplify the day-to-day process, the employer still has to understand the features and requirements of the plan, and advisers can play a key role in that.”
Stuart Robertson, president of Capital One Advisors 401k Services, in Seattle, agrees.
“While MEPs would standardize the investment lineup, thereby reducing advisers role in that respect, plan sponsors always need help with plan design, educating participants and knowing their fiduciary duties, so there would still be plenty of work for advisers to do,” he says.
Furthermore, there will still be plenty of small businesses that don’t decide to join a MEP and that will need the help of a retirement plan adviser, Pozek says.
Some specialist advisers could even create their own open MEP, says Tom Conlon, head of client relations at Betterment for Business in New York. “It would be a perfect opportunity for an adviser to create a fund lineup for multiple employers and leverage their research and fiduciary oversight,” he says.
Should they do so, it is likely that the retirement plan adviser will partner with a recordkeeper, which would serve as the administrator and maintain documents, Scheffler says. The adviser’s role would be to attract companies to the MEP and manage the investments, she says.
The executive order also calls for the electronic delivery of disclosures to participants. “While some participant populations have regular access to computers at work and home, others don’t,” so it may not be feasible, Scheffler says. Nonetheless, she adds, “electronic delivery is the wave of the future.”
Finally, the executive order asks the DOL and Treasury to explore whether the required minimum distributions should be raised beyond age 70.5, due to longer life spans. This could encourage participants to remain invested in their workplace retirement plans past retirement and, possibly, motivate sponsors to offer retirement income options.
“In my view, it would be a good idea for plan sponsors to think about offering retirement income options regardless of the required minimum distribution rule,” says Jennifer Delong, head of defined contribution at Alliance Bernstein. Conlon agrees: “We think it is a really good thing when plan sponsors offer in-plan income options.”