Too many Americans lack access to a workplace retirement savings plan. Open multiple employer plans (known as open MEPs) are one great solution to expanding retirement plan access.
The concept is simple – let unrelated employers band together to offer a common retirement plan to their employees.
MEPs are not a new concept. But they’re currently “closed” – that is, generally limited to employers who have some relationship to each other.
Opening up MEPs to any employer is a perfect solution for small employers who don’t have a retirement plan nor a “relationship” with other businesses. And expanding access to employees of small employers will have a significant and positive impact on Americans’ retirement security.
In 2018, 85% of employees of large businesses had access to a retirement plan. Contrast this with small employers (less than 100 employees) and the number drops to 53%. Looking at these numbers, it’s easy to see the potential open MEPs offer.
Open MEPs are easier for small businesses as the open MEP provider has fiduciary obligations and plan administration responsibilities. By pooling employees in one retirement plan, an open MEP can obtain increased purchasing power in the marketplace for investment products and administrative services – making it more cost effective for small businesses and their employees.
Open MEPS are also a better solution for small employers than state-run retirement programs. Unlike state programs, MEPs are covered by the Employee Retirement Income Security Act of 1974 and include robust consumer protections. Further, open MEP 401(k) plans will have higher annual contribution limits (currently $19,000) versus state-run IRA programs (currently $6,000) and offer the possibility of employer contributions.
It’s great that the Department of Labor (DOL) is re-examining its policy that limits MEPs. The DOL’s recent “Association Retirement Plan” rule was a good start to improving retirement access for employees of small businesses. But an even better solution can be found in the Setting Every Community Up for Retirement Enhancement (SECURE) Act. SECURE includes a broad open MEP provision.
The House passed SECURE by an overwhelming 417-3. The Senate needs to get this important legislation over the finish line.
Howard Bard is Senior Vice President and Deputy General Counsel with the American Council of Life Insurers (ACLI). Howard reports directly to the General Counsel with responsibility for supporting the legal needs of the organization. He also helps guide ACLI policy on regulation and legislation affecting the retirement security business of its members.
