Tag Archive for: Multiple Employer Plan

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401(k)s, 403(b)s and MEPs

“One of my clients is a health care association, the members of which offer both 401(k) plans and 403(b) plans to employees. The association is considering offering a multiple employer plan (MEP). Would there be any issues in creating one MEP that would include both the 401(k) plans and the ERISA 403(b) plans?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with an advisor in Illinois involved a case related to multiple employer plans (MEPs).

Highlights of Discussion

  • Under Section 106 of SECURE Act 2.0 of 2022 (SECURE 2.0), we now have certainty that 403(b) plans have access to MEPs and Pooled Employer Plans (PEPs) on par with 401(k) plans. A MEP is a single plan that covers two or more associated employers that are not part of the same controlled group of employers. A PEP covers two or more unrelated employers under a single plan.
  • However, existing treasury regulations do not allow mergers or transfers of assets between 403(b) and 401(k) plans [Treasury Regulation 1.403(b)-10(b)(1)(i)]. Further, the IRS has stated in at least one private letter ruling (PLR) (e.g., PLR 200317022) that if a 403(b) plan is merged with a plan that is qualified under IRC Sec. 401(a), the assets of the 403(b) plan will be taxable to the employees. Combining 401(k) and 403(b) assets in one trust could also jeopardize the tax-qualified status of the 401(k) plan.
  • Therefore, it would not be possible to maintain one MEP that covers both 403(b) and 401(k) plans. The association could use one 401(k) MEP to cover the 401(k) plans and a separate MEP for 403(b) plans.



While the law permits both 403(b) MEPs and 401(k) MEPs, it is not possible to have one MEP that covers both types of plans. The IRS treats 403(b)s and 401(k)s as unlike plans and, therefore, incompatible, for the purpose of plan-to-plan transfers or mergers.



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Pooled Plan Providers to Date by State

An advisor asked:  “Do you have any statistics around how many Pooled Plan Providers (PPPs) for Pooled Employer Plans (PEPs) have registered with the Department of Labor (DOL), and where they are located?”    

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Colorado is representative of a common inquiry related to Pooled Plan Providers.

Highlights of the Discussion

Yes, we do have some statistics based on a tool on the DOL’s website that shows PPP filings. As of August 3, 2021, the number of PPPs that have registered with the DOL to be able to offer PEPs is 117.* Keep in mind that number will continue to change. Registering with the IRS and DOL is one of the requirements for a firm to become a PPP of a PEP.  Below is a summary of the number of PPPs by state.

Pooled Plan Providers by State*

AR 1
AZ 3
CA 4
CO 1
CT 3
FL 42
GA 2
IL 6
IA 2
KS 1
MD 1
MA 3
MI 1
MN 6
MS 2
NB 1
NV 1
NJ 4
NY 9
OH 1
PA 6
SD 2
TN 1
TX 8
UT 4
VA 1
WA 1

*(As of 08.04.2021. States without registrants omitted.)

The most likely entities to serve as PPPs include financial institutions, such as banks and insurance companies, record keepers, large broker/dealers, registered investment advisor firms, payroll providers and local chambers of commerce.

To encourage more businesses to sponsor workplace retirement plans, Congress created PEPs, available for adoption starting in 2021 through registered PPPs. PEPs are new plan structures created by a segment of the Further Consolidated Appropriations Act of 2020 also known as the Setting Every Community Up for Retirement Enhancement (SECURE) Act. These new plan arrangements allow two or more completely unrelated employers to participate in a single retirement plan administered through a registered PPP. Each employer has the fiduciary duty to prudently select and monitor the PPP and other fiduciaries of the PEP.

The idea behind PEPs is that employers would be more inclined to offer retirement benefits if they could band together to reduce the burdens and costs of plan maintenance. And, to sweeten the deal, the special plan startup tax credits in the SECURE Act allow eligible employers to receive up to $5,000 in tax credits for the first three years and offer an additional $500 tax credit for adding an automatic enrollment feature that can be used with PEPs.


PEPs became available for adoption starting in 2021 through registered PPPs. Thanks to a tool on the DOL’s website, the industry can stay up to date on PPP registrants.

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SECURE Act breaks congressional gridlock; Retirement provisions fast tracked

By W. “Andy” Larson

Just when we thought it was safe to enjoy a quiet year end (at least from a retirement policy perspective) our supposedly gridlocked politicians fast tracked the Setting Every Community Up for Retirement Enhancement (SECURE) Act as part of the Further Consolidated Appropriations Act, 2020 —a necessary, year-end government spending bill. The SECURE Act contains some of the biggest retirement-related changes in years.  The president is expected to sign the bill on 12/20/2019 to avoid a shut-down. Many provisions are effective January 1, 2020, and we need to move quickly to get advisors and clients prepared for the changes. We encourage you to contact RLC to discuss SECURE Act training for advisors and clients www.retirementlc.com.

What will change?

Many aspects of retirement plans are affected by the SECURE Act.  We will focus on just a few of the major provisions here, and then discuss initial steps advisors can take to address these changes.


  • Required Minimum Distributions (RMDs) begin at age 72
  • Stretch IRAs eliminated or curtailed for many beneficiaries
  • Traditional IRA contribution eligibility regardless of age

Qualified Plan

  • Expanded availability of Multiple Employer Plans (MEPs) to unrelated employers through “Pooled Plan Providers”
  • Opened eligibility for 401(k) plans for certain long-service, part-time employees
  • Enhanced tax credits for small employers establishing qualified plans
  • Mandated retirement income disclosures for participants in defined contribution plans
  • Increased penalties for late IRS Form 5500 filings
  • Reduced the voluntary in-service distribution age for defined benefit plans and 457(b) plans from age 62 to 59½ (a provision originally from the Bipartisan American Miners Act of 2019)


  • New qualifying distributions (for apprenticeships, homeschooling, private school costs and up to $10,000 of qualified student loan repayments)


  • New provisions for the disposition of terminated 403(b) plans

Next steps

Despite their near immediate effectivity, some implementation aspects of these new rules won’t be finalized until the IRS issues additional regulations.  Regardless, we feel it’s important to begin discussions post haste with individuals potentially impacted by these changes.  We encourage the following preliminary steps in addressing the SECURE Act changes:

  • Notify IRA clients under age 72 of the new ability to postpone RMDs.
  • Alert IRA clients with nonspousal beneficiaries that the stretch distribution provisions will be cut back, and work with them to consider alternatives in conjunction with their estate planning counsel.
  • Alert nonspouse beneficiaries with inherited IRAs of the changes to the stretch distribution rules. Discuss mitigating tax strategies with them and their tax and legal advisors.
  • Inform individuals over age 70 and still working they may continue making traditional IRA contributions if they are otherwise eligible.
  • Discuss with small business owners MEP opportunities and the expanded tax credits.
  • Review with 401(k) plan sponsors the new eligibility rules for part-time employees.
  • Modify 401(k) employee communication strategies based on new retirement income projection requirements.
  • Discuss with 401(k) plan sponsors the importance of timely and accurate IRS Form 5500 filing in light of the increases in late filing penalties.
  • Consider amendments to plan documents that will be required by the end of the 2022 plan year (2024 plan year for certain governmental plans).
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Much Ado About MEPs

by W. Andrew Larson, CPC

Multiple employer plans (MEPs) are consistently in the news. Their proponents, which include a bi-partisan Congressional group, claim MEPs can offer small and mid-sized employers the advantage of lower administrative and investment costs as they relate to offering employer-sponsored retirement plans, and would expand worker access to such savings arrangements. One would think that an arrangement that helps expand affordable, employer-sponsored retirement plan coverage would be a no-brainer and encouraged at all levels. Alas, policy issues are rarely this simple.  In light of the heightened level of industry interest, we thought it timely to discuss MEPS, including what they are, where they came from and prognosticate on where they might be going.

A MEP is a retirement plan adopted by multiple employers. (Not to be confused with a multi-employer plan, which is a plan maintained pursuant to a collective bargain agreement between more than one employer and a labor union. These plans are sometimes referred to as “Taft-Hartley” plans. Please see our “Case of the Week” Multi and Multiple Employer Plans–What’s the Difference? for a more in-depth comparison.)

A MEP is a qualified plan adopted by multiple business entities none of which are part of a “controlled group of businesses.” Understanding the controlled group dimension is important because multiple businesses may adopt a plan and yet the arrangement would NOT be considered a MEP if the businesses where part of a controlled group of businesses. Essentially, a controlled group of businesses exists when multiple business entities have a certain level of common ownership among them.

Another element in understanding the MEP environment relates to the various Federal entities involved with MEP oversight and regulation. Retirement plans are subject to oversight by the IRS, the Department of Labor (DOL) and, in some cases, the Securities and Exchange Commission (SEC). Each agency is focused on its own policies and rules, and coordination is often lacking. Much MEP confusion (and contention) occurs because of the lack of regulatory coordination between these entities. This results in odd situations; for example, a MEP arrangement can satisfy IRS rules and, simultaneously, run afoul of DOL or even SEC requirements. Next, let’s explore how the confusion with the rules that govern them arose and what might be some possible resolutions.

Traditionally, the IRS was comfortable with, if not supportive of, MEP arrangements. In fact, this author was involved in obtaining approvals from the IRS for MEPs in the 1980s. If certain criteria were met, the IRS considered a MEP a single plan requiring one Form 5500 filing and audit despite the fact many employers were participating in the arrangement.

Historically, the DOL had little involvement with MEPs. Things changed, however, starting around 2010. The DOL became increasingly concerned about MEP arrangements and possible abuses. It didn’t help MEP supporters when, at about the same time, a high-profile, politically-connected, California-based MEP provider was found guilty of embezzling MEP assets.

In 2012, the DOL issued MEP guidance that had a major impact on these arrangements (see Advisory Opinion 2012-04A). First, the DOL decreed that a MEP arrangement must have a “nexus” or commonality between the adopting employers in order to be considered a single plan. For example, if all adopting entities were dental offices a nexus would exist. The origination of the nexus requirement is obscure as nexus is neither mentioned nor alluded to in the IRS MEP code or regulations [under IRC Sec. 413(c)]. I have heard it said the nexus requirement is important to prevent abuses yet, when pressed, the proponents of this view could neither articulate the abuses nor explain how nexus would solve them. For terminologies sake, a MEP without a nexus is commonly called an “open MEP,” and a MEP with a nexus is a “closed MEP.”

Why is open or closed MEP status important? Recall the IRS considers a MEP a single plan and subject to a single Form 5500 and audit requirement. The DOL’s view is, unless a nexus exists, the arrangement is considered a combination of single employer plans and each employer would need to file its own Form 5500 and audit report, when applicable. The IRS was comfortable with treating a MEP as a single plan regardless of nexus, while the DOL insists on nexus if the arrangement is to be considered a closed MEP and treated as a single plan.

And let’s not forget about our friends at the SEC. They may want to play in the MEP regulatory sandbox. Recall that under a MEP, unrelated employers pool their retirement assets in the plan’s trust. This pool of assets might be considered a mutual fund for purposes of the Investment Company Act of 1940, and subject to registration and reporting requirements.

Another MEP requirement that draws concern is the “bad apple” rule. The bad apple rule calls for disqualification of the entire MEP if just one of the adopting employers fails to satisfy the IRS compliance rules. Losing qualified status means the participants are taxed on vested benefits and plan sponsors may lose deductions. Yes, the “bad apple” rule sounds scary, but let’s consider what has happened in the real world. It is not the policy of the IRS to disqualify plans except in the most egregious situations of plan sponsor malfeasance. The IRS prefers plan problems be fixed via its Employee Plans Compliance Resolution System (EPCRS). To my knowledge, a MEP disqualification because of the bad apple rule hasn’t yet occurred and I don’t think that it will.

It seems clear MEPs have the potential to create economy of scale and help place small employers on more equal footing with larger employers in terms of administrative costs and features. Industry benchmarking data is clear that small employers’ plan operation costs are higher than larger employers’ costs, and one solution could be a MEP. A MEP allows employers who were not part of a controlled group to participate in a single retirement plan and save money on plan costs and get better pricing from investment providers.

Clearly challenges remain. For example, several years ago a large trade association was fined millions of dollars by the IRS because the IRS contended the nature of the  MEP arrangement was such that the trade organization was in control of the MEP and could, and did, set its own compensation from the arrangement. This was clearly abusive, yet solutions exist to mitigate these types of abuses.

In this era when expansion of retirement plan access and coverage is becoming a common call in public policy, and many efforts are being made to expand retirement plan availability while reducing costs to employers, the author is perplexed at the seemingly artificial impediments to MEP creation. In fact, several bills before Congress would enhance the attractiveness of MEPs. The bills make it clear no nexus would be required, and they would also do away with the all or nothing bad apple testing requirements. At the time of this writing, the fate of these bills is unclear. We sincerely hope legislation that expands retirement coverage and reduces costs for small employers and their participants can be something both political parties support.

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Multi and Multiple Employer Plans: What’s the Difference?

“I’ve heard the terms ‘multiemployer plan’ and ‘multiple employer plan;’ is there a difference?”

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.

Highlights of Discussion

  • Yes, there is a difference, and knowing the distinction is important. The two terms are often confused.
  • A multiemployer plan refers to a collectively bargained plan maintained by more than one employer, usually within the same or related industries, and a labor union. These plans are often referred to as “Taft-Hartley plans” [(ERISA §§ 3(37) and 4001(a)(3)]. Multiemployer plans must comply with the qualification rules under IRC §414(f).
  • Multiemployer plans allow employees who move among employers within unionized industries – such as trucking, construction and grocery-store chains – to participate in the same retirement plan negotiated under either separate or common collective bargaining agreements.
  • For in-depth guidance on multi-employer plans, please refer to the IRS’ Internal Revenue Manual, Part 7, Chapter 11, Section 7.11.6
  • In contrast, a multiple employer plan is a plan maintained by two or more employers who are not related under IRC §414(b) (controlled groups), IRC §414(c) (trades or businesses under common control), or IRC § 414(m) (affiliated service groups). Multiple employer plans must comply with the qualification rules under IRC §413(c).
  • The Department of Labor provided some important guidance on the treatment of multiple employer plans in Advisory Opinion 2012-04A .
  • For in-depth guidance on multiple employer plans, please refer to the IRS’  Internal Revenue Manual, Part 7, Chapter 11, Section 7.11.7



The terms multi- and multiple employer plans are often confused. Knowing the difference is important as they refer to two completely different types of plans that involve more than one employer.




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