I like to tell people that there is a backstory to the 2012 Advisory Opinion MEP letter request of ours which was roundly rejected by the DOL, at a time when the whole idea of unrelated employers partaking in a single plan was widely met with skepticism. I guess I need to be careful, though, in its telling, being reminded by the last verse of Robert Frost’s “Road Not Taken” of the embellishment of the stories we tell of our choices “ages hence”…..
“I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.”
Nonetheless, it’s still pretty amazing what has happened since, as there appears now to be an entire industry growing around the notion of these sorts of plans. Pooled Employer Plans become a real thing as of the first of the year, though there is still one heckuva paucity of guidance related to them. Many of you may now be pressed as to the question of whether or not you or your clients should choose this road. I had published a version of the following back in January, but it seems timely to provide it again (in slightly different form), as a hopefully useful tool when you try to weed through your own assessment of these arrangements. It is a Glossary we had put together, which is more topical now as ever. Keep this as a (hopefully) handy guide when you find yourself caught in the middle of a conversation about “PooledEmployer 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. The PPP (see #3) is not actually a sponsor or a lead employer (there really is none) and each participating employer is a “co-sponsor.”
PS: IRAs can be in 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.
The PPP is actually just a “super” service provider to the Plan, which is jointly hired by all of the participating employers (and the logistics of that is a hoot!), who has to file a registration from with the DOL. The PPP and the articulating employers are each a sort of “responsive plan fidcuiary as that term is used by 408(b)(2). A traditional MEP (see #1), by the way, 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.
4. Group of Plans: Now this one s gets very little press, but it is may well eventually be a “bigger deal” than PEPs. A Group of Plans 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:
- 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 program put together by 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 does not become available, however, until after 12/31/2021. The question is whether or not you delay jining a PEP in order to join a Group of Plans-which can be lot less hassle than a PEP or MEP.
5. ARP: This is an acronym for the “Association Retirement Plan.” This term was coined by the DOL’s 2019 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 still has a “commonality”requirement, though in slightly expanded form). The ARP survived r the SECURE Act.
6. PEO MEP: The “bona fide Professional Employer Organization” was permitted by the 2019 DOL MEP reg to sponsor a traditional MEP (see #1) as long as it meets certain, specialized criteria. The PEO mEP also survived the SECURE Act. A PEO which questions whether they actually meet that specialized criteria 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 2019 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 actually be much better suited for these circumstances than by going the “Corporate MEP” road.
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 too goofy to be 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. Both a MEP and a PEP can take advantage of this rule.
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. Yes, they are still around, but shouldn’t be-they simply don’t work. Because a plan of unrelated employers will now work as a “PEP,” , I would expect the term PEP to supplant it’s use.