MEP’s have been all the rage recently. President Trump recently signed an executive order asking regulators to make it easier on small businesses to sponsor retirement plans. There is a lot to unpack in this executive order. For those who are near age 70 1/2, the order is asking for a review of RMD (required minimum distribution) amounts. With Americans living longer, this makes some sense.
The downside is it will also cost the government money so a bi-partisan approach will need to be taken. The big piece for the retirement plan advisory world is the possible expansion of MEP’s. A MEP is a multiple employer plan. The idea is that by bundling employers together it will be easier and less expensive to offer a plan (more on that later). In the past, there had to be a common bond among those employers (ex. American Bar Association members).
There also was a one bad apple issue. If one employer failed in their duties, everybody failed. The industry has been arguing to get rid of this rule. For start up plans, open MEP’s hold significant promise. They can limit the set-up costs of a plan and offer a basic vanilla plan to an employer without excessive costs. There is one tax filing and one audit per MEP versus each employer having to do their own. For large plans over 100 employees with low account balances, MEPs can be a great solution.
But what about those groups who have mature plans with healthy account balances? The issue with most MEPs pricing is that the large members of the MEP significantly subsidize the costs of those smaller or start-up plans in the MEP. This costs them and their employees money. While the regulatory language has a good ways to go, it would be helpful to have open MEPs available to the public. That being said, each employer should critically evaluate the positives and negatives before jumping in blindly. #401k #403b #fiduciary