PLAN SPONSOR Magazine article describing the features and benefits of multiple employer plans written by Terrance Power. Reprinted with permission.

1. “Multiple” Choice
Multiple Employer Plans—an enticing alternative for plan sponsors
generation of “open” MEPs for unrelated Selecting a Multiple
companies has sprung up. While MEPs
Employer Plan
can deliver tremendous benefit to many
plan sponsors, an MEP is a solution in Questions to ask:
search of a problem for others. This article
is written to help plan sponsors determine Will you have to change your existing
if this approach is a good fit for their plan features?
organization.
Who is handling the administration
An MEP (not to be confused with a multi-
(TPA) work, fiduciary oversight, and
employer, or Taft Hartley, plan) is a retire-
plan operations?
ment plan established by one plan sponsor
that is then adopted by one or more partic- What are the credentials and MEP
ipating employers. When an employer
expertise of the various parties involved
merges its current single-employer plan
with the MEP?
into a properly structured MEP, the role
of plan sponsor then transfers from the How long have the parties to the MEP
adopting employer to the plan sponsor of been involved with MEPs?
the MEP.
Terrance Power Is there an ERISA attorney advising the
CFP, QPA, ERPA, AIFA, APR, CLU, ChFC The MEP sets up a single plan that covers
MEP and maintaining the plan document?
President all adopting employers, with the plan
If so, what is their background specific to
American Pension Services, Inc. document generally written to allow
MEPs?
for variation in plan design among the
participating companies. Fund selection
AN INTRIGUING new use of a long-estab- How are all of the parties paid? Are there
and monitoring generally are handled by
lished concept is catching the attention of potential conflicts of interest or prohibited
the MEP. Discrimination testing and plan
small to mid-size plan sponsors seeking transactions?
design (with some limitations) generally
a way to simplify 401(k) plan oversight:
remain with the adopting employer.
Multiple Employer Plans (MEPs). By If you wish to retain your current adviser
merging their plan into a properly struc- The shift in responsibility results in several within an MEP arrangement, are they
tured MEP, employers cease to be a plan potential benefits: adviser-friendly, holding themselves
sponsor and effectively transfer many of accountable and transparent to the
the responsibilities and liabilities associ- Elimination of annual plan audit. Plans adopter’s adviser?
ated with being a named fiduciary to the that cover more than 100 employees typi-
MEP. cally are required to have an annual plan Is there a proper separation of the roles
audit performed as part of their annual and ownership structure of the MEP’s
The MEP concept is exploding in popu- plan Form 5500 filing. Under the MEP plan sponsor, independent fiduciary, and
larity. Established under ERISA 413(c), arrangement, there is still a plan audit, contracted service providers?
MEPs historically have been used by but only one that is performed at the
companies that share a common industry overall MEP level. The annual audit that What measures does the MEP take
or payroll provider, primarily association is required by each employer (now known to screen out “bad apples” that could
plans and professional employer orga- as an “adopter”) is eliminated, resulting in affect the entire MEP? Does the MEP
nizations (employee leasing). However, significant savings to the employer. contract allow them to unilaterally push out
as interest in outsourced fiduciary solu-
adopters with compliance problems?
tions has grown in recent years, a new Mitigation of fiduciary risk. Indepen-
REPRINTED FROM PLANSPONSOR 8/11

2. dent fiduciary W. Michael Montgomery adopting employers no longer file a Form measures will be taken. In the 20-plus
described the impact on fiduciary liabili- 5500, maintain a fidelity bond, or shoulder years that I’ve been associated with
ties in Multiple Employer Plans as a Fidu- the responsibility for 408(b)(2) compliance. Multiple Employer Plan clients, I’ve yet
ciary Risk Mitigation Tool: These are handled by the plan sponsor to see this occur. It is important that
that is associated with the MEP, not the employers confirm the availability of a
“Employers adopting a sound Multiple adopting employer. For some employers, “disgorgement provision” in any MEP
Employer Plan…achieve a profound this benefit is inconsequential. For others, that they may be considering. This
reduction in fiduciary risk exposure. The the desire to let outside experts run the important plan design feature allows
reason is a simple one: The adopting plan can be more important than either the MEP to quickly eject and thereby
employer ceases to perform certain key the audit relief or fiduciary risk mitigation. isolate any noncompliant adopter from
roles that incur fiduciary status. When
the plan.
an employer merges its current single- MEPs are not a good fit for every employer.
employer plan into a properly structured Some plan sponsors already are mitigating If these features are appealing and the
MEP, it is no longer the sponsor of the their fiduciary exposure through a compre- limitations are acceptable, you may want
plan. It also should cease to be a trustee, hensive, well-documented fiduciary to look further into the Multiple Employer
plan administrator, or any sort of named process. Others don’t consider the cost or Plan approach as a solution to your
fiduciary. Those central roles move to the effort of an annual audit to be significant company’s retirement plan strategy.
MEP, and the inherent fiduciary liability enough to justify making a change. Still
transfers with them.” others take satisfaction in staying engaged I’ve been told by plan sponsors that they
in plan oversight and fund monitoring. decided to join an MEP because these
The relief offered by MEP participation is Simply put, if the advantages of an MEP programs are handled the same way as
extensive but not total. Certain responsi- appear to be solving a problem you don’t their other employee benefit programs,
bilities generally remain with the adopting have, this approach is not for you. where the benefit providers handle all the
employer, and even this reduced role must details. For example, while an employer
be taken seriously. An employer also should consider the could, at least in theory, negotiate with
potential limitations inherent in most doctors, hospitals, MRI service providers,
Those responsibilities include: MEPs. These may include the following:
pharmacies, etc., for their employees’
medical coverage, most find it easier to
plan contributions. its own fund menu. For many, this outsource these micro-managed decisions
is a relief. Others want to have more to a third party—in that case, a health
involvement in investment decisions insurance provider that offers a group
of match. health-care policy.
and consider this a takeaway.
There is a trade-off in control, options,
MEP, including necessary due diligence etc., but there also is comfort in knowing
some MEPs offer a degree of flexibility,
and monitoring of the MEP. that there are professionals at the helm
most are tied to a single recordkeeper
or third-party administrator, so you and that they have a vested interest in
will most likely have to leave behind making sure that their employees are
notices and information, though this
your current providers to enjoy the taken care of in accordance with the terms
may at times be handled directly by the
benefits of adopting an MEP. of the arrangement.
MEP plan sponsor.
- Plan sponsors and their advisers will, of
tance for participants. one adopting employer with serious course, need to determine on a case-
compliance violations could cause the by-case basis whether these programs
Streamlining of plan operations. In entire MEP to be disqualified, though are a “fit” for their plans and their plan
addition to the audit elimination, MEP a more likely scenario is that corrective participants.
American Pension Services, Inc., is an independent third-party retirement plan administration firm located in Clearwater, Florida. APS
handles the compliance and testing associated with qualified retirement plans (primarily 401(k) plans) for small to medium-size employ-
ers, as well as for numerous Professional Employer Organizations (PEOs) located across the country.
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