The dust has begun to settle around the DOL's Advisory Opinion, 2012-4, and a number of different voices have spoken about what the opinion says, and what it doesn't say. At this point, it may be useful to to put the letter in some context.
The clarity it brings is, in fact, very helpful. What drove the request was that need for that clarity: with the growing size and sophistication of this market, important parts of the marketplace needed more certainty in order to continue to build their business models. Though we were, of course, hopeful for a different result, the needed guidance is now in place for this (and other similar) arrangements to properly structure and safely grow the businesses.
1. What the DOL said. The DOL said several important things:
-It simply stated that no two, unrelated employers may co-sponsor a single ERISA retirement plan unless those employers are (a) members of a group with an "association" type of relationship and (b) that the members of that group or association control, directly or indirectly, that retirement plan. In much of the current discussion, by the way, the "control" aspect is often overlooked.
-In determining whether there is commonalty and control in a MEP, the Department will rely on its guidance outlined in past MEWA rulings.
-From the initial opinion request, and the DOL's response, its pretty clear that the DOL is taking the position that the decision to join a MEP (and its attendant delegation of responsibility) is a fiduciary act of the adopting employer.
2. General applicability
The Advisory Opinion is the DOL's position with regard to all MEPs, not just the one at issue. The Opinion was thoroughly vetted within the Department at length, and other agencies were consulted. It was issued following the DOL's brief in the Hutcheson matter, and issued with another, similar AO on MEPs. It has, like all seminal DOL advisory opinions in the past, general applicability.
This means that whether a MEP is sponsored by a traditional association or otherwise, it will be subject to both the commonality and control rules. Each MEP's validity as a single ERISA plan is assessed using the MEWA rulings related to the definition of employer, and this assessment may have fiduciary implications.
Thought I do not agree with the Department's analysis, and believe that the legal basis in the initial request is a sound one, it is clearly a position with which the Department does not and will not agree. So it is to this DOL position each such arrangement of any sort will need to manage.
3. What the DOL did not say.
The DOL properly noted, as also reflected in the original opinion request, that close attention needs to be paid in a MEP (as in any arrangement dealing with multiple employers) to the manner in which the prohibited transaction rules apply to the compensation paid to the parties in interest. This, in fact, is a key element of the design of any such arrangement. The DOL did not say that the design submitted to it violated those rules.
The DOL did not give any type of MEP a "pass." It did make clear the rules that will apply to any arrangement seeking single ERISA plan status as a way to deliver services, and where to seek guidance for the application of those rules.
It did not "go after" TAG; the parties voluntarily sought sought firm guidance from the Department from which to base further growth in its business model.
4. The impact. For the properly structured arrangement, the transition to comply with the DOL's formal guidance can be be straightforward, and can actually result in less risk for both the sponsor of the arrangement and the adopting employers. The advantages of scale in administrative and investment services, as well as professional fiduciary support, can and will continue to be able to be offered to the part of the market for which there is still the most need. ERISA offers a number of different ways by which to continue to doing this, but using the "single plan" method will require that attention be paid to the the DOL's traditional commonality and control analysis.
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