By Robert Toth on Posted in 403(b),Multiple Employer PlansA 403(b) MEP is really complicated when you get down to it because-like anything 403(b), it seems-of the devil that exists in the details. For example, besides having to deal with the DOL 2012 Advisory Opinion on all MEPs; and the fact that the Tax Code Section governing 401(a) MEPS does not apply to 403(b) plans (which means you can never really have a 403(b) MEP for tax purposes); and that the ERISA Section governing all ERISA MEPs (including 403(b) MEPs) requires compliance with that Tax Code Section which doesn’t cover 403(b) MEPS; you still have to deal with the complications of dealing with those legacy contracts of the various participating employers in the MEP. Then there is the issue of dealing with those combination of ERISA and non-ERISA 403(b) plans commonly sponsored by a 403(b)participating employer. These require use of traditional state law agency rules to make them work.… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansThe DOL’s proposed regulation permitting Association Health Plans which cover unrelated employers is likely to have a significant impact on the market’s ability to offer Multiple Employer retirement plans to unrelated employers. This is because the regulation permits AHPs through the regulatory modification of ERISA’s definition of the term “employer” under Section 3(5).… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansThe DOL’s advisory Opinion on MEPs in 2012 was specifically premised on the DOL’s interpretation of the definition of “employer,” for health plan (MEWA) purposes. The DOL 's position was that it had no authority to redefine their historical definition of employer for MEWA purposes merely for retirement plan purposes, that they were bound by the statute to apply the same “employer” definition to both health plans and retirement plans. Does this mean that the new proposed definition of "employer" will, necessarily, by operation of statute, be expanded for retirement plan purposes as well? … Continue Reading
By Robert Toth on Posted in Fiduciary Issues,Multiple Employer Plans,Separate AccountsOne of the most unique, flexible, and underutilized investment platforms in the 401(a) marketplace is the insurance company variable “pooled separate account” (the “PSA”). It may be the least understood investment platform, being buried in group annuity contracts....Why they are worth a look is because of the current discussions on MEPs and their alternatives, and the growing popularity of collective trusts. (They) can give plans access to well-priced investments, along with access to large numbers of unrelated funds and fund managers, which otherwise would not be available to them. … Continue Reading
By Robert Toth on Posted in Multiple Employer PlansThis Opinion demonstrates that the scale we seek is not exclusively the purview of the MEP. Vendors have the ability to safely “bundle administrative services” to the same effect of a MEP, provided that they have enough scale on their own to negotiate the sort of investment pricing and expert services which the market seeks.
… Continue Reading
By Robert Toth on Posted in Multiple Employer Plans,Plan AdministrationThis legislation could fundamentally change the MEP landscape, and even lessen the contention over state run MEPs. It would do this by opening the market for the advantageously pooling of the resources of small employers which would have otherwise been reserved to the State programs. It also could minimize any need for new federal MEP legislation, and promote models which are a lot less risky than the MEP.… Continue Reading
By Robert Toth on Posted in 403(b),Fiduciary Issues,Multiple Employer PlansThe complex nature of handling 403(b) plans-and, in particular, the unique manner in which the fiduciary rules apply to them-make these plans uniquely suited to customized fiduciary services. It is well beyond the skill set of many 501(c)(3) organizations to make sense of their often complicated 403(b) programs, and to put them into some kind of sensical order. This must be done all the while applying a number of rules intended for the 401(k) market (with their centralized recordkeeping systems) in a plan which may have significant assets held by multiple vendors under a variety of contracts with differing terms. … Continue Reading
By Robert Toth on Posted in Multiple Employer Plans,UncategorizedA more effective alternative at providing scale than the MEP platform, and one which really is made possible by technology, is what the DOL describes in its MEP IB as the "Prototype Approach," versions of which are apparently being considered by several states. It provides those small plans the buying power and access to expertise which are at the heart of MEPs, doing so without that platform's inherent difficulties.
… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansMEPs are very valuable tools for the right circumstances, and there can be some PEOs which do fit within the DOL’s guidelines. Even better, non-MEP aggregation arrangements are 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.… Continue Reading
By Robert Toth on Posted in Multiple Employer Plans,UncategorizedThere is a serious, and important, debate occurring whether, and to what extent, should there be MEP reform following the DOL’s restrictive advisory opinion on the matter in 2012. There appears to be bi-partisan support for the changes proposed in Senator Hatch’s SAFE Act, which makes wholesale changes to the current MEP rules, and will… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansBuried deep within “The Cooperative and Small Employer Charity Pension Flexibility Act of 2014 (CSEC Act),” enacted on April 7, 2014 is a new MEP Form 5500 reporting requirement. It is one which, frankly, most of us missed. It came to light as the DOL issued its Interim Final Rule (to be published November 10 in… Continue Reading
By Robert Toth on Posted in Fiduciary Issues,Lifetime Income,Multiple Employer PlansIn an almost stealth-like way, innovation is creeping into the marketplace and creating ways to address critical retirement issues, even without an incubator. Though these programs can do little to address what I view as the basic retirement inadequacy issue-that is, employers are generally moving away from the traditional notion of building adequate retirement programs into their employment models-they are making progress toward making the best of what we've got.… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansMultiple Employer Plans continue to be an issue for not only PEOs, but for a number of organizations which has successfully used the MEP method in the past to provide "scale" which is otherwise unavailable in the smaller end of the 401(k) marketplace.The DOL Advisory Opinion 2012-04 has caused us to take a closer look at how to otherwise achieve this scale. Scale in investments and services, we find, is still possible without using MEP, and in ways which tend to have a lower risk profile for both the MEP sponsor and participating employers.… Continue Reading
By Robert Toth on Posted in Multiple Employer Plans The GAO issued its long awaited study on Multiple Employer Plans. It is nicely written, and for those who with an interest in such matters, it’s a good read. It pretty well summarizes the current state of affairs related to MEPs. The report, along with our own recent review of MEPs, really demonstrates a few… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansThe dust has begun to settle around the DOL’s Advisory Opinion, 2012-4, and a number of different voices have spoken about what the opinion says, and what it doesn’t say. At this point, it may be useful to to put the letter in some context. The clarity it brings is, in fact, very helpful. What… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansThe DOL’s Advisory Opinion process is a helpful one, as it provides a manner in which to explore and test the development of innovative programs which are necessary for the retirement system to properly adapt and change. One of the Advisory Opinions issued today is a case in point. A continuing challenge in the marketplace… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansAs you can imagine, I have been asked by a number of folks of my thoughts related to the statements by the DOL in their brief for removal of the fiduciaries in the Hutcheson matter. Besides the observation that this sort of mischief could have (and does happen) regardless of the existence of a MEP,… Continue Reading
By Robert Toth on Posted in 403(b),Multiple Employer Plans I have written often of the large impact of the small, the concept of "minimum necessary change" to accomplish what needs to be done, and have noted a number of regulatory instances where this has been-and not-accomplished. This whole idea of small rules meaning much also has relevance in the Multiple Employer Plan world, in… Continue Reading
By Robert Toth on Posted in Multiple Employer Plans Since we first published a MEP whitepaper with TAG Resources a few months back, where TAG coined the term “Open MEP,” much has happened in this marketplace. Most recently, Drinker Biddle published its own (very good) whitepaper on this topic, very much affirming, and going into closer detail on, many of the broad points we… Continue Reading
By Robert Toth on Posted in Multiple Employer PlansIn blogging, I don’t typically write about informal conversations I have had with anyone, including government staff, friends or colleagues, without first discussing it with them. I fear that otherwise I would indeed lead a lonely life, as who would ever talk with me if there was a chance that conversation would end up on… Continue Reading
MEPs are very valuable tools for the right circumstances, and there can be some PEOs which do fit within the DOL’s guidelines. Even better, non-MEP aggregation arrangements are 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.… Continue Reading