Department of Labor Publishes Guidance Addressing Multiple Employer Plans:

Since last month’s edition of The Speed Reader, the U.S. Department of Labor (“DOL”) published two pieces of guidance that affect multiple employer retirement plans (“MEPs”). 
Final Regulation
The DOL published a final regulation on July 31 that, in the DOL’s words, “expands access to affordable quality retirement saving options by clarifying the circumstances under which an employer group or association or a professional employer organization (PEO) may sponsor a multiple employer workplace retirement plan under title I of ERISA (as opposed to providing an arrangement that constitutes multiple separate retirement plans).” This is important, because a MEP that fits within this guidance can file one Form 5500 each year and have a CPA firm provide one plan audit each year (if the audit requirement applies), rather than each participating employer having to file its own Form 5500 and having its own CPA audit each year (if the audit requirement applies). The final regulation, which is a bit less complex than the proposed regulation that the DOL published on October 23, 2018, will become effective on September 30, 2019.
First, a group or association of employers can sponsor a MEP if:

  • The primary purpose of the group or association can be to provide MEP coverage to its employer members and their employees; however, the group or association also must have at least one substantial business purpose unrelated to providing MEP coverage.
  • Each employer member of the group or association that participates in the MEP is generally a person acting directly as an employer of at least one employee who participates in the MEP.
  • The group or association has a formal organizational structure, with a governing body, and has by-laws or other similar indications of a formal structure.
  • The functions and activities of the group or association are controlled by its employer members, and the employer members that participate in the MEP control the MEP.
  • The employer members have a commonality of interest (i.e. the employers are in the same business, or each employer has a principal place of business in the same region).
  • The group or association does not make MEP participation through the association available other than to employees and former employees of employer members (and their beneficiaries).
  • The group or association is generally not a bank or trust company, insurance issuer, broker-dealer, or other similar financial services firm (e.g., a plan recordkeeper or third-party administrator).

Second, a PEO can sponsor a MEP if the PEO satisfies the following requirements:

  • The PEO performs substantial employment functions on behalf of its client employers that adopt the MEP, and the PEO maintains adequate records relating to those functions. Whether the PEO performs those substantial employment functions is generally determined based on the applicable facts and circumstances of the particular situation. However, the regulation provides a safe harbor under which a PEO will be deemed to perform those substantial employment functions if the PEO satisfies several requirements (e.g., the PEO must pay wages to employees of its client-employers that adopt the MEP, without regard to the receipt or adequacy of payment from those client employers).
  • The PEO has substantial control over the MEP as the plan sponsor, the plan administrator, and a named fiduciary, and it continues to have employee-benefit plan obligations to MEP participants after the client employer no longer contracts with the PEO.
  • The PEO ensures that each client employer that adopts the MEP acts directly as an employer of at least one employee who is a participant in the MEP.
  • Participation in the MEP is available only to employees and former employees of the PEO and client employers, employees and former employees of former client employers who became MEP participants during the contract period between the PEO and former client employers, and their beneficiaries.

The regulation does not apply to the popular plan design of so-called ‘‘open MEPs,’’ which are retirement plans that cover employees of employers with no relationship other than their joint participation in the MEP. The regulation, however, does note that the DOL is asking the benefits community “for comments on a broad range of issues relating to open MEPs…for possible future rulemaking” and that the DOL will “defer rulemaking on open MEPs until after a fuller public record is developed.”
Here is a link to the final regulation:
Field Assistance Bulletin 2019-01
On July 24, the DOL published a Field Assistance Bulletin (“FAB”) that provides temporary penalty relief regarding certain Form 5500 requirements for MEPs that are subject to Title I of ERISA. As background, starting with the first plan year beginning after December 31, 2013, MEPs must file complete and accurate lists of participating employers with their Forms 5500. Those lists must include “a good faith estimate of the percentage of total contributions made by [all] participating employers during the plan year.” In the FAB, the DOL states that “a substantial number of MEP filers” have not been in full compliance with this reporting obligation. Thus, the FAB provides transition relief for MEPs that have failed to file a complete and accurate list of participating employers with their Form 5500 for the 2017 plan year and before.

Under this relief, the DOL will not reject a MEP’s Form 5500 for the 2017 plan year or any prior applicable plan year, or seek to assess civil penalties against the plan administrator with respect to such Forms, solely because the plan administrator failed to include complete and accurate participating employer information in accordance with ERISA. To obtain this relief, however, the plan administrator must ensure that the plan’s Forms 5500 for 2018 and following plan years comply with the ERISA’s requirements in this regard.

You can access the FAB here: