When the American Retirement Association reported last week that the Department of Labor had recently
submitted a "final rule" to the Office of Management and Budget
pertaining to "Savings Arrangements Established by States for
Non-Governmental Employee", it raised an inquisitive eyebrow.
There are questions surrounding the various
structures associated with state sponsored retirement plan schemes for private
sector employees that this proposed rule will likely address. The questions
range from state sponsorship of retirement plans with a marketplace approach,
to prototype plan formats, and - a topic close to my heart - multiple employer
plans.
There has been a well deserved outcry from the
private sector retirement plan community about the need for us to be able to
compete with these new state-sponsored plans on a level playing field. The
proposed state-sponsored "open multiple employer plan" format contains pretty much
all of the features that we would like to see made available under private
sector plan rules.
This format should be expanded to the private sector
413(c) multiple employer plans as well.
We anticipate that the submitted rule changes will
include the elimination of a "nexus" or "commonality" among
adopters, elimination of the "one bad apple rule" that could - in
theory - disqualify a multiple employer plan due to the actions of a rogue
adopter, allow for one global Form 5500 (with only one plan-wide annual plan
audit) regardless of the number of adopters, and a few other upgrades that were
somewhat restricted back in 2012 via a DOL Advisory Opinion. No one knows for certain what's in the
rule at this point. It's anyone's guess.
The 2017 U.S. Budget, as proposed by the Obama
administration, contains $100,000,000 to allow for the expansion of multiple
employer plans in an effort to broaden retirement plan coverage and simplify
the duties and liability on employers who wish to offer a retirement plan to
their employees.
The timing of the actions by the DOL not only ties
in with the upcoming effective dates of some of the state programs, but they
also may be preparing to set in motion the expansion of multiple employer plans as a private sector solution for the
small to mid-market retirement plan sectors at the same time.
It would make sense for the Department of Labor to
level the playing field by addressing some of the restrictive issues that
currently hinder the rapid expansion of retirement plan coverage under a
broader multiple employer plan availability. It would also tie in nicely with
the wishes of the Obama administration and a bipartisan Congress to expand
these programs before the upcoming election.
Maybe things are about to fall into place. We'll
know exactly what the new rules state no later than the end of October.
