PEP RFI Proposal Lands at OMB

While much of the government is working from home, the Labor Department has dropped off its proposal for a Request for Information on Pooled Employer Plans at the Office of Management and Budget (OMB). 
 

A May 1 update by the White House’s Office of Information and Regulatory Affairs, which is part of OMB and oversees the regulatory agenda for the federal government, indicates that the Department of Labor’s Employee Benefits Security Administration plans to issue the RFI on PEPs and Multiple Employer Plans (MEPs). 

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted in December 2019, eased the previous rules that had restricted MEPs to employers that have a common interest or relationship. Under the SECURE Act, two or more unrelated employers will now be able to join a PEP. This provision is effective for plan years beginning after Dec. 31, 2020.

 

By pooling the assets of multiple plans, MEPs have long been touted as being able to provide economies of scale that result in lower administrative and asset management costs. But because under ERISA a defined contribution plan must be established and maintained by an “employer,” and since ERISA doesn’t define what it means to act “directly as an employer” or “indirectly in the interest of an employer, in relation to an employee benefit plan,” nor does it explain what is meant by “group or association of employers,” there has been a great deal of uncertainty as to the broad applicability of this design. Enter the SECURE Act, which provided the long-anticipated clarity around the design, now labeled a Pooled Employer Plan.

 

By eliminating the commonality requirement and the so-called “one bad apple” rule, as well as requiring only a single plan document and streamlining the audit and Form 5500 reporting requirements, a Pooled Plan Provider (PPP) can now market a PEP to employers, paving the way for an expansion of these plans. 

 

DOL Assistant Secretary Preston Rutledge, who oversees EBSA but plans to leave by the end of May, earlier this year confirmed that the DOL will issue guidance on rules surrounding PEPs, as well as guidance on prohibited transactions for the new PEP provisions. 

There is no timeline for release of the RFI, but the OMB generally has up to 90 days to vet the request and either approve it for release or send it back for modifications. In general, an RFI is conducted at the pre-rule stage when a government agency wants to receive stakeholder feedback on specific questions it may have and collect pertinent information prior to the development of a proposed rule.