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DOL Unveils Final Rule on Association Retirement Plans

Technical Resources

The Department of Labor announced a final rule today that expands the availability of some multiple employer plans (MEPs) – and an RFI that seeks more information on “open” MEPs. 

Acknowledging that Association Retirement Plans (ARPs) and MEPs exist now, the Labor Department notes that in addition to employer groups in the same industry or line of business, the final rule makes it clear that an ARP can also cover employers in the same geographic area, such as a common state, city, county, or a metropolitan area (even if it crosses state lines). Moreover, they note that working owners without employees, including sole proprietors, can participate. 

In a press release announcing the rule, the Labor Department notes that under the rule, ARPs could be offered by associations of employers in a city, county, state or a multi-state metropolitan area, or in a particular industry nationwide. In addition to association sponsors, the final rule includes a regulatory safe harbor for Professional Employer Organizations (PEOs) (human resources companies that contractually assume certain employment responsibilities for their employer clients), noting that the final rule helps PEOs with a pathway to be certain they are offering a valid MEP.

Moreover, by expressly permitting these new plan arrangements, the Labor Department says the rule enables small businesses to offer benefit packages comparable to those offered by large employers, and that it “expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses’ hand when negotiating with financial institutions and other service providers.” The final rule’s effective date is Sept. 30, 2019.


Noting that “many commenters asked the Department to give further consideration to facilitating “Open MEPs,” a 16-page Request For Information (RFI) is published with the final rule. Responses to the RFI are due by Oct. 29, 2019.

Last Labor Day weekend, President Trump signed an executive order directing the Departments of Labor and Treasury to consider changes to make it easier for businesses to join together to offer MEPs, which the order refers to as Association Retirement Plans (ARPs). 

In keeping with that directive, last October the Department of Labor released proposed rules that would expand access to multiple employer retirement plans for small employers and self-employed workers, while also – critically – maintaining fiduciary oversight. The proposal was modeled after the Association Health Plans (AHPs) concept, and provided that an association – under certain conditions – would be permitted to serve as the employer for purposes of sponsoring the 401(k) for members of the association, such that the association will be the standing in the shoes of the employer. The proposal also clarified that PEOs can sponsor a 401(k) for clients that a PEO works with on other human resource functions, and would also permit certain working owners without employees to participate in a MEP sponsored by a group or association.

However, that proposal did not include the kind of “open” MEP by unrelated employers that has been the subject of much industry enthusiasm, and which has been incorporated in a number of recent legislative proposals, most notably the Setting Every Community Up for Retirement (SECURE) Act. The DOL notes that it has to interpret the law as currently written and that pending legislation on Capitol Hill would address this. 

Disclosure ‘Closure’?

Pending passage of the SECURE Act, advisors and plan sponsors alike have more to look forward to, as delegates at the seventh annual NAPA D.C. Fly-in Forum were told July 23 by a senior Labor Department official to keep an eye out for proposed guidance addressing electronic disclosure of retirement plan information. Jeanne Wilson, Principal Deputy Assistant Secretary with the Department of Labor’s Employee Benefits Security Administration (EBSA), said the agency would soon be issuing a proposal that follows up on President Trump’s 2018 Executive Order directing the agency to improve the effectiveness of and reduce the cost of retirement plan disclosures. 

Stay tuned.