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Multiple Employer Plans - A Fiduciary Solution With A Platinum Standard

By Author: Terrance Power
Total Articles: 13

Last week in Washington, officials from the U.S. Department of Labor are hearing from industry insiders on the pros and cons of scraping the long standing “suitability standard” for a “fiduciary standard” for the clients of the financial services industry.

Both sides have done an excellent job of presenting their cases, and both sides have raised very valid concerns. The political realities of Washington, D.C. will, unfortunately, insure that any final decision will quite likely be the result of political pressure applied by both of these adversaries.

As the retirement plan industry continues to struggle with their vision of what the future could look like under a proposed fiduciary standard, employers continue to search for what has seemed to many of them to be an ever elusive answer to minimize internal workload, lower costs, and minimize fiduciary liability in their own company retirement plan.

401k Outsourcing is a serious alternative that employers are considering more and more, especially for those companies that have less than 1,000 employees.

What are the main reasons for all of the interest in 401k Outsourcing?

Compliance requirements, investment selection and monitoring duties, operational oversight, plan document maintenance, lower costs, and the ability to have someone “run their 401k plan" in much the same manner as an employer handles all of their other employee benefit programs are just a few.

In virtually all other employee benefit programs, an employer selects a provider, who then handles all of the internal program details (whether it’s a health care policy, group life, worker’s compensation, dental plan, etc.). The employer will review the provider and their services on an annual or more frequent basis to make sure the provider is still the right “fit” for their company.

With a 401k Outsourcing Solution, employers don’t have to become experts on QDRO’s, Hardship Withdrawals, Investment Selection and Monitoring, Control Groups, Form 5500’s, 408(b)(2) notices, etc. The provider can effectively take on that role and assume responsibility for the oversight of these requirements. The employer can benefit from operational efficiencies that can translate into significant time and cost savings, as well as significantly reduced liability.

That is why retirement plan outsourcing is the future of our industry.

I was honored to have been invited last summer by the U.S. Department of Labor ERISA Advisory Council to provide testimony on the topic of Outsourcing Employee Benefit Plan Services. The final recommendations of the Council earlier this year reinforced the position that by allowing employers to offload many of the duties and liabilities associated with running a 401k plan, employers could gain pricing concessions, reduce operational challenges, and lower their own liability significantly. The report was very well done and is worth your time to read (I have attached a link to the Council's report on the bottom of this post, as well as a link my own testimony before the Council.)

Legislative proposals this year by Senator Orrin Hatch, Chairman of the Senate Finance Committee, are poised to dramatically broaden the availability of multiple employer plan programs (commonly referred to as an open MEP) for smaller, unrelated employers across the country. Multiple Employer Plan programs have been in existence since the 1950’s, and are used by thousands of employers every day as a cost effective solution to the many complexities and operational challenges that are associated with running a qualified plan.

I expect some significant progress on Senator Hatch’s multiple employer plan proposals when Congress reconvenes after the summer recess in a few weeks. I would suggest that we will also see a legislative solution to the heated debate on the imposition (or not) of a true fiduciary standard on Wall Street as part of the same package.


Contact me at tpower@ThePlatinum401k.com or at 813.774.3366 for more information about multiple employer plan (open MEP) solutions. We've worked with multiple employer plan clients for over 25 years and are the industry leader in this niche field. We work with advisers and clients all over the country to reduce cost and employer liability. There's more information available on our website at www.ThePlatinum401k.com.

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