The U.S. Department of Labor (DOL) has released a final rule which should make it easier for smaller businesses to provide retirement plans to their employees. According to the DOL, the rule will enable more small and midsize unrelated businesses to join forces in multiple employer plans (MEPs) that provide their employees a defined contribution plan such as a 401(k) plan or a SIMPLE IRA plan. Certain self-employed individuals also can participate in MEPs.

In October 2018, the DOL issued a proposed rule to clarify when an employer group or association, or a professional employer organization (PEO), can sponsor an MEP. (A PEO is a company that contractually assumes some human resource responsibilities for its employer clients. Both ADP and Paychex, among others, offer such programs.) The final rule, effective September 30, 2019, is similar to the proposal, but not entirely.

The appeal of an MEP

According to the DOL, businesses that participate in an MEP can see lower retirement plan costs as a result of economies of scale. For example, investment companies may charge lower fund fees for plans with greater asset accumulations. By pooling plan participants and assets in one large plan, rather than multiple small plans, MEPs make it possible for small businesses to give their workers access to the same low-cost funds offered by large employers.

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