A multiple employer plan provider is an adjourn savings plan acquired by two or more employers that are unrelated for income tax purposes, as defined by the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL). Industries that join the MEP are known as “adopting employers.
Making the Best of Open
MEPs Making Open MEPs accessible to small business managers ensures many retirement savings targets. However, the ability to reap the full profit of Open MEP cooperation is dependent on several options, including the following: 9 Off-the-shelf vs. custom plan design.
Plan design decision rules about flexible and vesting, the inclusion of auto-features and matching contributions, and others can play a significant role in how effective a plan may be in enrolling participants, encouraging savings, and preparing workers to retire on their terms.
Because Open multiple employer plan providers are equipped to streamline the process of donating and maintaining a retirement plan, participating employers may have limited choices when it comes to planning design. As you select Open MEP sponsors, carefully consider the plan provisions and whether they are a good fit for the actual plan goals and workforce demographics. Hands-on vs. hands-off plan administration. However, the period and cost of managing a retirement plan can disappoint small businesses from choosing one. By joining with other industries in an Open MEP, employers may have the opportunity to ease the burden of plan management and reduce costs by achieving economies of scale.
However, making sure they partner with an experienced third-party administrator (TPA) will be crucial to achieving these benefits, and in helping to participate, employers handle administrative responsibilities outside the Open MEP umbrella, such as IRS nondiscrimination testing and contribution limits, allocating employer contributions, and forfeitures, calculating participant vesting percentages and preparing loan paperwork.
It’s also essential to understand what support a TPA provides in assessing the business’s needs to minimize plan expenses and escalate successful retirement benefits. Limited investment menu or customized. The selection and availability of investment choices in a retirement plan are a big part of the cost equation. The ability to combine assets under one general umbrella enables Open MEPs to offer access to lower-cost funds typically available only to larger companies with more significant purchases and more purchasing power.
However, those cost savings arrive at the expense of customization. Open MEPs provide participating employers with a pre-selected investment menu that may limit employers’ ability to tailor an investment lineup to meet all their preferences. Here again, advisors and small employers can learn a lot by carefully considering how an Open MEP sponsor structures plan options and what level of customization may be available.
3(38) vs. 3(21) fiduciary oversight. One of the essential benefits of Open MEPs is that they are structured to provide employers a significant amount of support. This includes the ability to reduce some (but not all) of their fiduciary responsibilities, particularly related to handing over control of selecting and monitoring investment options for their plan to a so-called 3(38) investment leader. This is in contrast to 3(21) fiduciary services, where an advisor suggested investment options while the employer retains discretion, authority, and fiduciary liability for fund selection.