While the Setting Every Community Up for Retirement Enhancement Act (the SECURE Act) and its promise of truly open multiple employer plans (MEPs) sat with the Senate this summer, the US Department of Labor (DOL) and Internal Revenue Service (IRS) both issued guidance addressing MEPs.
DOL Final Regulations – MEPs Open Up for Bona Fide Groups or Associations
Under ERISA, only an “employer” may sponsor a pension plan. ERISA defines the term “employer” to include certain groups or associations of employers. The DOL has interpreted this to mean that only a bona fide group or association of employers may sponsor an MEP, thereby limiting the ability of employers to group together to achieve economies of scale aimed at reducing the administrative costs of establishing and maintaining a retirement plan.
On July 31, 2019, the DOL published final regulations addressing the definition of “employer” under ERISA for purposes of its rules on who may sponsor MEPs. These final regulations supersede proposed regulations issued on October 23, 2018, and prior subregulatory guidance.
The final regulations provide a safe harbor definition of “bona fide group or association of employers.” If a group of employers satisfies this definition, the DOL will deem the group an “employer” for purposes of being able to sponsor an ERISA pension plan. This safe harbor definition requires the group to satisfy a seven-factor test.