Multiple employer plans (MEPs) are a topic that many plan providers talk about, but don’t really know what’s allowed and what’s not.
A multiple employer plan is a plan where unrelated employers adopt a plan and it should be treated as one plan for purposes of filing a Form 5500.
There was something called an open MEP where the employers were unrelated to each other. Then there was something called a closed MEP, where there was a connection or nexus between all of the adopting employers, such as members of a trade group.
In 2012, an Open MEP unwisely sought guidance from the DOL on whether their MEP qualified as a single plan for purposes of Form 5500. The DOL said it did not because there was no connection between adopting employers and the Open MEP plan sponsor wasn’t an employer, it was just a company created by the financial advisor to sponsor a MEP. The DOL stated that all of the adopting employers needed to file a Form 5500, which defeated one of the most important features of a MEP.
People thought this was the death of Open MEPs. It was in the sense that there is no more Open and Closed MEPs, there are just MEPs that will qualify as a single plan and MEPs that won’t. Most importantly, the DOL never provided any further guidance on MEPs which means that the advisory opinion issued in that Open MEP case was only applicable to that Open MEP in question. It gave the DOL’s thinking on MEPs and a blueprint for MEP operators to develop a MEP that could be considered a single plan for 5500 purposes.
Almost years later, there is still no guidance and there are plan providers who are spreading stories about MEPs on what qualifies as a single plan and what does not. In the end, it’s just opinion without real DOL guidance.
I believe that one day, Congress will pass legislation that will create Open MEPs because the DOL doesn’t seem to be in a hurry to offer any guidance. Open MEPs absolutely makes sense if you believe that employees should be covered under a plan and offering a plan that will be more costs effective and liability effective for employers to join. It’s funny that the DOL had no time for Open MEPs, but had time for government sponsored IRA programs that few employers want to join.
Will this be the year we get Open MEPs back? We shall see.
