There’s a continual siren’s call in the marketplace, enticing many to believe that the DOL’s seminal MEP Advisory Opinion, 2012-04 has limited applicability to arrangements like a PEO sponsored MEP. Like the siren’s call, such statements by these promoters are alluring, but potentially dangerous.
In that Advisory Opinion, the DOL made it clear that the Opinion would apply to MEPs the limited definition of what constitutes an “employer” that the DOL had historically applied to MEWAs (which are “multiple employer welfare arrangements,” which had been the source of long standing abuses). 2012-04 stands for the proposition that employers participating in a MEP must have a both a common employment bond between them, and that those employers must directly or indirectly control the MEP. There seem to be a number of arrangements which will have that bond, such as industry associations that were not formed for benefits purposes; franchise arrangements; commonly owned companies that don’t quite constitute a controlled group; and industry focused employment arrangements in a limited geographical area.
But the siren’s song’s lyrics are that the AO left open the question of whether or not a MEP is available under a PEO without these sorts of bonds, even claiming that making a PEO’s MEP available on an a la carte basis (the so-called “ASO” business) is permissible. The most recent version of that “song” which demonstrates the lengths to which parts of the market will go involves common paymaster services. Employers, the siren says, that each hire the same company to serve as its payroll agent each then form a DOL-compliant common employment bond with the others of that payroll agent’s customers.
This is a pretty absurd argument. It would be similar to an attorney claiming that clients which each appoint the lawyer as agent to deal with the IRS on retirement plan matters under a Power of Attorney have a common employment bond.
MEPs are very valuable tools for the right circumstances, and there can be some PEOs which do fit within the DOL’s guidelines. There remains a possibility for legislative relief as well. Even better, though, is that there are non-MEP aggregation arrangements which can be a valuable alternative to MEPs. It is risky behavior, however, to attempt to manufacture an employment bond that doesn’t really exist-especially when there are viable alternatives.
I will be speaking at ASPPA’s Annual Meeting next week at the Gaylord in National Harbor. Adam Pozek and I will doing a presentation on Taking Over a MEP on Tuesday at 4:15; I will be manning the Speaker’s Corner at 6:15 on Sunday; and facilitating a PEO session at 10 on Tuesday and a “when you should offer a MEP” at 2:30 on Tuesday. Come by and say hi!