Multiple employer plans are retirement plans adopted by more than one employer with unrelated tax information- IRS’s (Internal Revenue Services)definition. The companies that join MEP are known as adopting employers who have a fiduciary responsibility to sponsor and maintain administrative duties related to MEP.
Employers who don’t have the bureaucracy that allows them to deal with retirement plans independently can come together under multiple employers’ plans to collectively deal with fiduciary responsibilities tied to retirement. Furthermore, MEP is one way of achieving tax advantages accompanying retirement plans.
A brief history of multiple employer plans
The concept of multiple employer plans was hatched in the middle of the 20th century when the Department of Labor formalized it under the Labor Relations Act of 1947. This Act was branded the Taft Hartley Act after the famous band that prevented labor unions from certain awful practices- under President Truman’s veto. During that time, MEP was under constant criticism by audacious labor unions, but the adamant Republican-controlled Congress supported by various business lobbying activities were never bothered by the underdog’s noises.
Types of MEPs
Types of multiple employer plans revolve around the employer’s relationship with each other. Initially, there were only two, but the third type was added last year.
- Open MEPs
Employers under open MEPs don’t have any connection with each other apart from their retirement plan activities. The law required each employer to have his own distinctive and individualistic reports on retirement savings. However, the SECURE Act’s introduction in early 2020 allows all employers to join an open MAP under a single retirement plan.
- Association retirement plan (ARP)
This type of multiple employer plan is a cross-platform form of retirement saving that borrows some of its traits from closed MEPs. ARP allows employers from the same metropolitan area and geographical zone to join a single MEP. Additionally, companies that share the same industry irrespective of their geographical or state boundaries are also encouraged to join an ARP.
- Closed MEP
Closed multiple employer plans is the actual definition of MEP where unrelated employers who are the retirement’s plan sponsors and have similar and complementary interests in each other (Bona Fide) come together for this particular purpose. Employers under closed MEP policy must actively participate in bona fide because when they make a related decision on retirement plan matters, it affects each of them.
The bad thing about MAP
For decades, MAP has been a politically dominated issue; thus, the origin of its major regulatory problem- MEPs rules has hidden blunders in terms of entry qualifications. MEP is a single plan, which means if one of its members violates a single rule, the entire system could collapse within a fortnight. The problem can technically occur, only that the present-day MAP has existed for a few months; hence there hasn’t been enough time to evaluate the subject.
Multiple employer plans have traveled from post-world war II ideological theories that bore its types. And we have pointed out MEP’s time bomb to help unsuspecting employers engage in early maneuvers to avoid stepping on it!