Buried deep within “The Cooperative and Small Employer Charity Pension Flexibility Act of 2014 (CSEC Act),” enacted on April 7, 2014 is a new MEP Form 5500 reporting requirement. It is one which, frankly, most of us missed. It came to light as the DOL issued its Interim Final Rule (to be published November 10 in the Federal Register) implementing the reg for the 2014 plan year (yes, this plan year). MEPs will now have to report all of their participating employers, their EIN and a good faith estimate of the “percentage of the contributions made by all participating employers made by each employer relative to the total contributions made by each employer.”
Here’s the language from the new reg:
The instructions to the Form 5500 and Form 5500-SF will now provide that the Annual Return/Report filed for a multiple-employer plan must include an attachment that identifies the participating employers in the plan by name and employer identification number (EIN) and includes for each participating employer an estimate of the percentage of the contributions made by each employer (including employer and participant contributions) relative to the total contributions made by all participating employers during the plan year. This attachment, entitled “Multiple-Employer Plan Participating Employer Information,” supplements and does not replace other Form 5500 filing requirements that apply to multiple-employer plans.
The CSEC Act effectively created a new sort of multiple employer defined benefit plan for certain charities. The new reporting rules, however, did not apply just to these new types of plans. It applies to all MEPs, including those 401(k) MEPs run by PEOs and payroll companies.
This will have a significant impact on these types of arrangements: now that the each participating employer name and EIN will be listed in the Form 5500, I would expect these plans to see substantially increased audit activity from both the DOL and the IRS. This is because of the simple math. Prior to this rule, only the Lead Employer in a MEP would (as a practical matter) be audited. Now each participating employer will individually show up on the agencies’ audit protocols (think IRS’s EPCU (creators of the infamous 401(k) Questionnaire)). We do know, for a fact, that this will be demanding on a MEP’s resources.
This will also increase the scrutiny of MEPs and the applicability of the DOL’s MEP Advisory Opinion AO2012-04A. However, even should legislation pass permitting “Open MEPS”®, the landscape for these arrangements will be permanently changed.