As defined by Transamerica, a multiple employer plan is a retirement plan that covers employers that typically have a common interest, but are independent entities. They are also typically small businesses with perhaps just a handful of employees. Kais outlined several reasons why a MEP may be the right solution for these companies. When an employer decides to join a MEP, they become an “adopting employer.” The plans can either be designed as a defined contribution (DC) or defined benefit (DB) plan.
Kais described the coverage gap many workers are currently facing. Ninety-four percent of full-time, for-profit employees feel that a 401(k) or other employee-funded plan is important, yet only 74% of full-time, for-profit employees at small companies are offered a 401(k) or other employee-funded plan. Transamerica believes that MEPs can help close the gap between small employers offering a retirement plan and those who do not.
Trying to manage a retirement plan individually involves a host of complexities for small-plan sponsors, said Kais, such as: fiduciary responsibilities, uncertainty about the future of the business, costliness, lack of understanding of business incentives to sponsor a plan, a disconnect between employer and employees on the value of a retirement benefit, lack of expertise in plan management, and the fact that they are administratively burdensome.
When weighing the decision on whether to join a MEP, Transamerica suggests that a plan sponsor consider the following questions:
- Who will be the Trustee?
- Who will be the Fiduciaries?
- Who will be the Plan Administrator?
- How is education and enrollment delivered?
- What is the investment selection process?
- Who provides and manages the plan document?
- How flexible do they want the Plan?
- How will compliance testing be handled?
- Who is the common payroll remitter?
- How much administration can be outsourced?
The Webcast also provided guidance for financial advisers who decide to work with a MEP, advising them to should keep the following points in mind:
- offer clients top quality retirement plan services,
- help clients manage fiduciary responsibility,
- help clients best mitigate fiduciary risks, and
- provide value-added expertise to help clients maximize plan effectiveness and meet regulatory obligations.