PANC 2012: Making Sense of MEPs

Multiple-employer plans (MEPs) do not absolve plan sponsors from fiduciary responsibility, despite what marketing campaigns may advertise.

“Before the end of May, we lived in a world where there was a lot of marketing,” David Levine, principal at Groom Law Group, Chartered, told attendees at the 2012 PLANADVISER National Conference. “It’s pretty clear that [this] didn’t sit well with the [Department of Labor].”

In May, the Department of Labor (DOL) issued Advisory Opinion 2012-04A, which addressed whether a multiple-employer plan open to unrelated employers constitutes a single employee pension benefit plan (see “DOL Says Open MEPs Not Single-Employee Plans”). The DOL said it has been its consistent view that where several unrelated employers merely execute identically worded trust agreements or similar documents as a means to fund or provide benefits, in the absence of any genuine organizational relationship between the employers, no employer group or association exists for purposes of the Employee Retirement Income Security Act (ERISA) section 3(5).   

This means that each employer that has adopted an open MEP will be treated as if they have their own stand-alone plan and disclosure requirements such as Form 5500 and plan audits that have been done collectively until now must be performed separately going forward.

Marketing materials that claimed plan sponsors could reduce or completely eliminate their fiduciary responsibilities was a “trigger point” for the DOL to issue its advisory, said Geoffrey Strunk, senior vice president and general counsel at ExpertPlan Consulting Services. “The idea that you can delegate [fiduciary responsibility] all away, I think, is kind of a farce.”

Plan sponsors can still offer open MEPs, but they have lost many of the advantages after the DOL’s advisory guidance, Strunk said. Going forward, he thinks plan sponsors will need guidance on Form 5500s, citing it as a “serious concern.”

Levine said some open MEPs in the startup phase have simply shut them down after the DOL advisory, while other large MEPs have continued and are adjusting to the DOL’s guidance.