Maximizing Growth Potential

In the eight years from 2009 through 2017, assets in multiple employer plans (MEPs) grew 58%, from $163.5 billion to $258.2 billion, while the number of these plans decreased from 2,810 to 2,641, according to BrightScope data. Among the top 20 multiple employer plans, the number of participants covered ranged from 8,967 to 209,592, and assets ranged from $2.3 billion to $28.1 billion.

MEPs have been in existence for many decades but only available in what is known as a “closed” format: They require a common nexus, such as industry or location, among the employers who participate.

There is bipartisan support for what are referred to as “open” MEPs—aka pooled employer plans (PEPs)—which remove that common nexus requirement. Currently, a number of bills in Congress—the Retirement Enhancement and Savings Act being chief among them—aim to pave the way for open MEPs. If one of those bills passes, the number of these plans could surge.

Lawmakers and retirement plan industry stakeholders support the idea of open MEPs because they are less expensive for smaller employers to administer—resources, notably plan administration and governance, are pooled—and could, therefore, extend workplace retirement savings plans to more Americans.

In a recent webcast, Kelly Michel, chief marketing officer for Envestnet Retirement Solutions in San Jose, California, said, “My personal take is that MEPs will be the next big disruptor for the retirement plan market. They will impact nearly every single stakeholder.”

She said she believes employers of every size will be attracted to open MEPs. She contended that, among large plans, there is little variation in plan design. “If you’re a large plan sponsor, and 80% of your provisions are similar to that of a MEP, you’ll weigh the uniqueness of your plan against the risk of maintaining it yourself.” Her prediction is that, as better MEP solutions evolve, all plan sponsors will evaluate shifting their fiduciary responsibility to another entity.

According to Pete Swisher, senior vice president and national practice leader at Pentegra Retirement Services in White Plains, New York, retirement plan advisers will play a key role in convincing sponsors to join open MEPs. Additionally, some lobbying groups are pushing for MEP legislation that would keep the selection of each employer’s investment lineup with that particular employer; should this pass, advisers will play a key role here, as well, Swisher says.

However, he adds, just one plan adviser may be all that is needed for a MEP, no longer individual advisers serving individual employers; in the same way, there may be just one plan committee. So open MEPs could also specifically disrupt the retirement plan advisory industry.