“Aggregating” plans has now taken center stage with the passage of the SECURE Act. We now often find ourselves a bit muddled by the new array of terms with which we now need to deal. Keep this as a (hopefully) handy glossary to guide when you find yourself caught in the middle of a conversation about “Multiple Employer Plans, and need to quickly summarize the different MEP types:
1. MEP: This is your plain vanilla, traditional “Multiple Employer Plan.” Yes, they will still exist after all is said and done, and if you have a MEP that meets all of the pre-SECURE Act rules regarding “commonality and control” (including the regs which also describe PEO MEPs (see # 6) and Association MEPs (see #5)), you don’t need to do anything-EXCEPT that the (i) plan terms must provide for a simplified “One Bad Apple” (or unified plan rule, see #8) and (ii) there are new Form 5500 reporting requirements.
2. PEP: A PEP is a “Pooled Employer Plan.” Simply put, it’s a still MEP, (I guess you should call it a PEP MEP), but one that doesn’t fulfill the “commonality” requirement under #1. Instead, the PEP will qualify as a MEP as long as it has something called a “Pooled Plan Provider” (a PPP, see #3). Yes, the MEP that’s a PEP will also (i) have to have a simplified “One Bad Apple” (or unified plan rule, see #8) rule in its terms, and (ii) have special Form 5500 reporting requirements.
PS: IRAs can be PEP MEP, too.
3. PPP: A PPP is the “Pooled Plan Provider” that has to be hired by the PEP in order to qualify as a MEP. A PPP is a “person” (it really can be anybody: TPA, and insurance company, a mutual fund management firm, a broker, or even just an individual!) that is
- “a” named fiduciary (which simply means it is named as a fiduciary in the plan documents) which accepts full responsibility, in writing, for the plan meeting the terms of ERISA and the Code;
- registers with the DOL as such, before becoming a PPP;
- the participating employer agrees to provide to the PPP the info needed to properly operate the plan; and
- the PPP makes sure all parties handling plan assets are bonded.
A traditional MEP (see #1) doesn’t qualify as a PEP. And until the DOL and IRS issue guidance on how you do a PEP, you can operate under a good faith basis after the effective date.
PS: Each Participating employer in the PEP is still considered a plan sponsor.
4. Group of Plans: A Group of Plans, as of yet, has no acronym (though I guess we can call them GOPs). It is neither a MEP nor a PEP MEP. It’s just a bunch of unrelated employers who can file a “combined” Form 5500 if they have the same:
- Trustee,
- Plan administrator,
- Plan year, and
- Investments or investment options.
The idea of a GOP is that if you don’t meet the MEP rules under #1, and you have no interest in joining a PEP under #2 by using a PPP under #3, you can still get economies of scale by entering into common contractual/ fiduciary arrangements with unrelated employers- by filing a single 5500 in the same way a MEP or PEP MEP can. This option may prove more valuable than a MEP or PEP.
5. ARP: This is an acronym for the “Association Retirement Plan.” This term was coined by the DOL’s new regulation on MEPs. All it does is refer to the traditional MEPs (see #1), under which the DOL somewhat expanded the definition of what constitutes an “association” (and therefore has “commonality”). They still exist after the SECURE Act.
6. PEO MEP: The “bona fide Professional Employer Organization” was permitted by the new DOL MEP reg to sponsor a traditional MEP (see #1) as long as it meets certain criteria. These still exist after the SECURE Act, but a PEO which questions whether they actually meet the DOL regs’ rules may want to consider operating as a PEP MEP instead.
7. Corporate MEP: This is another new MEP term coined by the DOL in its new reg, and which still exists after the SECURE Act. It simply refers to those plans which had once covered all the members of a controlled group, and the controlled group became “uncontrolled”(my term!) by a change in ownership; or refers to those closely associated groups (such as affiliated service groups) which are covered by the same plan. The DOL recognizes that these may or may not meet the ARP rules (see #5), and typically not the PEO MEP rules (see #6), but something needs to be done about them. They have asked for comments on what to do with them. A PEP (see #2) may work in these circumstances.
8. Unified Plan Rule, or “One Bad Apple Rule”:This also has no acronym, but is worth putting in this glossary. The IRS put out extensive rules which would relieve MEP participating employers of the fear of on bad acting employer from “disqualifying” the plan for all the other participating employers. The IRS coined the term “unified plan rule,” I assume because “One Bad Apple” sounds goofy in a reg. In any event, it was a complex set of rules which were proposed by the IRS. SECURE completely gutted that proposal, simply saying that to qualify for this relief, the plan must merely provide for a process to disgorge the “bad apple” from the plan.
9. Open MEPs®. Prior to the Secure Act, this term referred to at least two different things: either a MEP of unrelated employers, or a MEP that was treated as a single plan under the Tax Code, but also as multiple plans under ERISA. Because a plan of unrelated employers will now be technically a “PEP,” and given that the Open MEP term is, after all, a registered trademark, I would expect the term PEP to supplant it’s use except by its owners.
A caveat: this Glossary is highly simplified, and is designed to lay out the major concepts of these programs in an understandable form. Each rule described above has a number of important details which need to be followed which are not discussed here.