For all the noisy support being generated for the changes to Multiple Employer Plan arrangements in RESA and SECURE, little notice is being given to the provisions which are likely to have a much more meaningful impact on the ability for smaller plans to obtain the advantages of scale: the rules permitting the “Combined Annual Report for Groups of Plans.”
These rules are based upon old DOL regulations called “Group Insurance Arrangements (or “GIAs) for welfare plans under 29 CFR 2520.104-21, which permit unrelated employers on the same insurance platform to file a single Form 5500. Under the proposed statutory language, retirement plans participating in a group arrangement could rely upon a single annual report filed by the common Plan Administrator, subject to requirements similar to that required of the GIA under 2520.103-2. This includes a single audit report by a single IQPA selected by the Plan Administrator.
Why is this going to be more impactful than MEPs?
Well, MEPs are hard to do. They are odd arrangements, subject to their own terms and conditions. In addition to the cross counting of years of service between participating employers, they require a centralized authority under the control of the members. It is also quite a task to remove an uncooperative MEP member.
Fintech provides us an out from all of this. Advances in technology really do permit us to aggregate plans on combined platforms in ways which replicate MEPs-without the arrangement actually being a MEP. Aggregating plans enable you to avoid all of those problems that the MEP language in RESA and SECURE is awkwardly trying to address; and you avoid the logistical problems inherent in MEP operations. You can aggregate plan documents, service agreements, investment platforms, investment advice all in a well priced package providing those advantages of scale which so often elude small plans.
The one thing that fintech CAN’T fix, however, is that each of the plans in the arrangement must currently file their own Form 5500s. The RESA and SECURE language fixes this by allowing these arrangements to file a combined 5500. I suspect that this arrangement will be more welcome in the TPA community than a MEP. The central fiduciary under these arrangements is actually the Plan Administrator, not a lead sponsor, and the arrangement (except for the common Plan Administrator) already mirrors many of the existing business practices of TPAs.
Here’s the proposed statutory language from SECURE, which is similarly found in Section 202 of RESA. It is striking in its simplicity, especially when compared to the MEP provisions:
SEC. 202. COMBINED ANNUAL REPORT FOR GROUP OF PLANS.
(a) IN GENERAL.—The Secretary of the Treasury and the Secretary of Labor shall, in cooperation, modify the returns required under section 6058 of the Internal Revenue Code of 1986 and the reports required by section 104 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1024) so that all members of a group of plans described in subsection (c) may file a single aggregated annual return or report satisfying the requirements of both such sections.
(b) ADMINISTRATIVE REQUIREMENTS.—In developing the consolidated return or report under subsection (a), the Secretary of the Treasury and the Secretary of Labor may require such return or report to include any information regarding each plan in the group as such Secretaries determine is necessary or appropriate for the enforcement and administration of the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974.
(c) PLANS DESCRIBED.—A group of plans is described in this subsection if all plans in the group—
(1) are individual account plans or defined contribution plans (as defined in section 3(34) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(34)) or in section 414(i) of the Internal Revenue Code of 1986);
(A) the same trustee (as described in section 403(a) of such Act (29 U.S.C. 1103(a)));
(B) the same one or more named fiduciaries (as described in section 402(a) of such Act (29 U.S.C. 1102(a)));
(C) the same administrator (as defined in section 3(16)(A) of such Act (29 U.S.C. 1002(16)(A))) and plan administrator (as defined in section 414(g) of the Internal Revenue Code of 1986); and
(D) plan years beginning on the same date; and
(3) provide the same investments or investment options to participants and beneficiaries.
A plan not subject to title I of the Employee Retirement Income Security Act of 1974 shall be treated as meeting the requirements of paragraph (2) as part of a group of plans if the same person that performs each of the functions described in such paragraph, as applicable, for all other plans in such group performs each of such functions for such plan.