If you talk to anyone who is working on pension legislation, they all will tell you that the provisions of RESA and the SECURE Act are as sure a thing as there is in DC; that their passage is not a matter of “if” but it’s just a matter of “when.” MEPs and “Group” arrangements (which permits unrelated employers on the same platform to file a consolidated 5500) are critical pieces of that legislation. It is pretty clear that that these will soon become a standard part of our regulatory framework.
However, as I have mentioned in previous blogs, MEPs are hard to do, and Group arrangements have their own detailed challenges which will need to be addressed by service providers. Achieving scale in the small plan marketplace takes a healthy and specialized skill set.
It’s not just going to be challenging for benefit professionals: the IRS the DOL are also going to have a number of challenges in regulating them (see, as just one example, my blog on the IRS 403(b) MEP issues). The promise of the advantages of scale offered by these new arrangements may be valuable, but it involves the regulators translating rules, procedures, investigations and audits generally applicable on an individual plan into some sort of combined plan basis as a normal part of its activities. I suspect this will call for a number of new regulatory protocols.
Which explains in large part the DOL’s new Field assistance Bulletin, 2019-01. MEP sponsors have been required since the 2014 plan year to report certain information on all of their participating plans on the MEP’s Form 5500.This includes
- the name of each participating employer,
- each participating employer’s EIN; and
- a good faith estimate of each participating employer’s percentage of total contributions to the MEP for the year.
Employers with account balances in the plan would have to be listed even if they had no contributions for the year. The attachment to the Form 5500 has to be labelled “Multiple Employer Plan Participating Employer Information.”
The DOL now reports that it surveyed 386 MEPs for the 2016 plan year and found that 101 of them were “non-compliant” with the MEP reporting requirements. Typical violations included replacing employer names with abbreviations or numbers (such as “Client 1”); reporting only the last 4 digits of the EIN; providing no information, stating instead that “information to be provided upon request;” or incorrectly identifying the PEO as the only participating employer.
The new FAB is designed to address these reporting issues, and the relief is generous one: anyone failing to properly report in prior years will have a pass, as long as they properly report the MEP data on the 2018 Form 5500. Given that the deadline is now upon us, the DOL will grant a special extension of time to file a MEP’s 5500 until October 15, 2019- without the filling of a Form 5558. If a plan has already incorrectly filed for the 2018 plan year, it may file an amended return by October 15. There is a catch: this relief is dependent upon the MEP sponsor providing the missing data from past years at the DOL’s request.
The most telling stories about this FAB are that (1) it establishes the data groundwork that both the DOL and the IRS need to determine what requirements will need to be imposed when RESA and SECURE (or their successors) eventually pass; and (2) for those who argued that this data is somehow an unwarranted imposition of an administrative burden on MEP operations need to be prepared, I think, for a substantial new set of regulations over time designed so that the agencies have sufficient information to fulfill their mandate.
MEPs and Group arrangements are not “solving” for regulatory exposure. They are “solving” for fiduciary and administrative expertise, which is typically unavailable to small sponsors, along with manageable audit costs and well priced (and availability of ) investments.