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On May 29, 2012, The U.s. Department Of Labor Issued Advisory Opinion 2012-04a.

By Author: Terrance Power
Total Articles: 13

This document explained the Department of Labor's position, at that time, on the use of multiple employer plans as they relate to companies who did not have any specific commonality or nexus that would otherwise tie them together.

It did not change the Internal Revenue Code Section 413(c) one bit, nor did it appear to change the position of the Internal Revenue Service on these types of programs. It did require multiple employer plan adopters to file individual Form 5500's, incur the cost for an individual annual plan audit as required under current regulations, and to possess an ERISA bond for their portion of the plan.

Perhaps a walk down memory lane might offer some perspective as to why the Advisory Opinion was issued in the manner in which it was.

In April 2012, noted "fiduciary expert" and multiple employer plan proponent Matthew Hutcheson was indicted on charges of stealing millions of dollars from a multiple employer plan that he oversaw (Hutcheson was eventually found guilty and sentenced to 17 years in federal prison for his crimes in 2013). The DOL issued a press release on June 14, 2012 (two weeks after the Advisory Opinion 2012-04A was released) announcing that they had obtained an injunction against Hutcheson relating to ERISA violations surrounding that case. They were right to do so.

Why is this timeline important? Clearly, during the time that the DOL was considering attorney Robert Toth's request for a favorable opinion from them, the entire Hutcheson mess came to light.....and had the kneejerk effect of creating an "all multiple employer plans are bad" reaction from the DOL.

While on the surface, this could appear to be a rational reaction to the theft of millions and millions of dollars from plan participants.

A deeper dive into the Department of Labor's own records of enforcement from their website, however, show much greater problems with operational compliance and theft occurring from single employer defined contribution and defined benefit plans when compared to multiple employer plan by an enormous margin.

It's not even close. It's not the plan structure that led to the theft, it was the criminal who was running the plan.

This writer believes that had the Department of Labor not been brought into the Hutcheson case at the exact same time they were weighing Toth's request, multiple employer plans would be the dominant retirement plan structure for smaller employers across the United States today.

As it stands now, Congress is poised to enact bipartisan legislation in both the Senate and the House of Representatives to expand and clarify the use of multiple employer plans via "Pooled Employer Plans" (PEP's) later this year. The bipartisan Retirement Enhancement Security Act of 2016
cleared the Senate Finance committee unanimously, but ran out of time to get to a floor vote last session. These proposals enjoy overwhelming bipartisan support in both Chambers, and a signature on the bill from President Trump is all but assured.

PEP's will greatly expand the availability of retirement plans for workers who are employed by smaller companies. They will lower costs to both participants and employers, and they will relieve business owners of much of the time consuming operational challenges and liability that is typically associated with overseeing a company retirement plan.

Most importantly, properly vetted Pooled Plan Providers (P3's) will be registered with the Department of Labor under the proposed legislation in an effort to help protect both plan participants and employers from the bad actors in our industry.

The next steps? The Department of Labor needs to rescind DOL AO-2012-04A and replace it with guidance that incorporates the spirit of the proposed legislation currently before our elected officials in Washington to help address the woeful retirement plan coverage problems that we are faced with today. It would also allow a more seemless transition from "MEP to PEP" under the new rules that Congress is expected to require to be in place for the 2021 plan year.

Congress needs to continue their work to establish Pooled Employer Plans, which will be overseen by registered Pooled Plan Providers beginning in 2021.

More information about MEP, PEPs, P3's and other comments about these exciting programs can be found in the November 2016 edition of InvestmentNews.com.

Years ago, I used to not like escargot. Not a bit. My opinion on it has changed, however. Perhaps it's time for a new Department of Labor team to see if their taste for MEP's has changed as well by addressing this important issue.'


This article is written by Terrance Power, CFP, ERPA, QPA, CRPS President, The Platinum 401k, Inc. tpower@theplatinum401k.com 813.774.3366.

Total Views: 93Word Count: 761See All articles From Author

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