The next item up for bids in our series on the Department of Labor’s new regulations on multiple employer plans is on professional employer organizations, more commonly referred to by their acronym: PEOs. These organizations have an interesting history when it comes to retirement plans.
Topic Archive: Multiple Employer Plan
Unless you’ve been on vacation somewhere off the grid, you’ve likely heard the news and read the headlines that the Department of Labor recently published new regulations that expand the availability of multiple employer plans. While that is true, what those new rules actually do is to change ERISA’s definition of the term “Employer” so that more types of organizations fit within it, thus allowing them to sponsor MEPs.
When the Department of Labor’s new multiple employer plan regulations take effect later this year, we will have three types of MEPs:
Yesterday morning while we were all sipping our first cup of Monday morning coffee, the Department of Labor published its much-anticipated final regulations expanding the availability of multiple employer plans to associations, PEOs, and self-employed individuals.
One of the drawbacks that is often cited about multiple employer plans is the so-called “one bad apple rule.” It provides that if a single participating employer in a MEP allows its part of the plan to operate in a non-compliant manner, it puts the entire plan and all of the other participating employers at risk. Although there have been numerous proposals in Congress to eliminate the one bad apple rule, none have made it across the finish line.
Back in March, Assistant Secretary of Labor Phyllis Borzi testified before a Senate committee, expressing concern about whether open MEPs can be treated as single plans under ERISA since there is no commonality among adopters. A recording of her testimony is here, with the MEP comments beginning around the 36th and 43rd minutes. Some commentators thought the testimony was a sign of what DOL’s official position would be, while others suggested it gave no cause for concern, because the Internal Revenue Code does not require the commonality that Asst. Sec. Borzi described.