November 5, 2019

SECURE Act: The Coming of Multiple-Employer Plans

In April, the House Ways and Means Committee voted to move forward with the retirement legislation entitled the “Setting Every Community Up for Retirement Enhancement (SECURE)” Act of 2019. Among other key features of the legislation that will help improve retirement saving and security for Americans, one of the main proposed benefits is the authorization of multiple-employer plan (MEP) arrangements. A MEP is a single retirement plan that is offered by two or more unrelated employers that share a required common nexus or interest. These types of plans are governed by Section 413(c) of the Internal Revenue Code and have been deployed successfully for many years by trade associations and professional organizations. It is only with the passage of the SECURE Act that the MEP concept will be available for all types of employers.

Removing the constraints around forming a MEP is endorsed on both sides of the aisle as well as by many affinity groups and the financial services industry as a whole. For the small employer market, MEPs would enable participation in a single, professionally managed plan that affords the economies of scale of a much larger plan with better fiduciary oversights. The benefits of MEPs would accrue to plan participants in the form of better investment options and lower fees. Furthermore, the wholesale introduction of MEPs has the potential of significantly narrowing the retirement plan coverage gap between employees at small firms versus those at larger firms.

Over the past few years, employers have increasingly realized the importance of retirement readiness and taking a more holistic approach to financial wellness. There is also a growing recognition within federal and state governments that many Americans are woefully unprepared for retirement. Access to a cost-effective plan that is in line with best practices provides an important stepping stone for building retirement security for a broader base of Americans.  We feel the climate is right for expanding the use of multiple retirement plans and look forward to the positive benefits the SECURE Act brings to our communities.

The Senate is reviewing similar legislation in the form of the Retirement Enhancement and Savings Act (RESA) with provisions that mirror the House bill. With such strong bipartisan support and agreement, it’s expected that a final bill will pass through Congress and make its way to the desk of the President for passage into law, possibly before the end of 2019.