In a testimony, Charles A. Jeszeck, director of education, work force and income security at the Government Accountability Office (GAO), told lawmakers a March 2012 GAO report (see “GAO Recommends Retirement Plan Outreach for Small Employers”) found many of the small employers who were contacted said they felt overwhelmed by the number of plan options, plan administration requirements and fiduciary responsibilities for setting up and maintaining a retirement plan for employees. Some small employers found it challenging to select investment funds for their plans, and some cited a lack of financial resources, time and personnel as challenges to sponsoring a plan.
Jeszeck also noted that participants in small plans often pay higher recordkeeping and investment management fees than participants in larger plans. He told lawmakers multiple employer plan (MEP) representatives have suggested MEPs as a viable way for small employers to reduce the administrative and fiduciary responsibilities that come with sponsoring a pension plan, as well as to reduce costs, in part through asset pooling.
However, the GAO found that these advantages are not always unique to MEPs. There was also no consensus on the potential for MEPs to increase plan coverage. During the GAO’s September 2012 study (see “GAO Explores Use of MEPs”), the Department of Labor (DOL) ruled that some MEPs made up of otherwise unrelated employers did not constitute a single pension plan but an arrangement under which each employer sponsored a separate plan for its own employees.
“Because this raises significant policy and compliance questions and data are limited, it is important that Labor gather information on participating employers to inform policy and oversight activities on retirement security for employees of small businesses,” Jeszeck said, according to a report of his testimony.
The report is here.