Multiple Employer Plans continue to be an issue for not only PEOs, but for a number of organizations which have successfully used the MEP method in the past to provide “scale” which is otherwise unavailable in the smaller end of the 401(k) marketplace. But for the “bad actors” as in the Hutcheson matter, this scale can effectively provide smaller employers with a high level of fiduciary coverage, well priced investments, a wide variety of non-proprietary investment funds and a greater level of professional service they really could not get elsewhere.
The DOL Advisory Opinion 2012-04 has caused us to take a closer look at how to otherwise achieve this scale. Scale in investments and services, we find, is still possible without using MEP, and in ways which tend to have a lower risk profile for both the MEP sponsor and participating employers.
The attached whitepaper,sponsored by TAG Resources, the applicant for Advisory Opinion 2012-04, “Fixing the MEP: Using an Aggregation Program to Manage the “ASO” Risk in the PEO Multiple Employer Plan” discusses this alternative to a MEP. It does so in the context of addressing the “ASO” problem in a PEO. PEOs, regardless of their position with regard to the application of 2012-04 to their own lines of business, have a problem if they offer their MEPS on an a la carte basis, which is referred to as the ASO (“Administrative Services Only”) business.
This paper has application well beyond the ASO issue. It provides some thoughts with regard to the manner in which service providers may be able to effectively provide scale to the smaller case marketplace.
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