On August 31, 2018, President Trump signed an executive order (EO) directing the Departments of Labor (DOL) and Treasury to work on a number of matters affecting the private retirement system. The EO includes the following directives:
Expanding multiple employer plans (MEPs); limited amount can be done without Congress. Under current DOL guidance, a MEP exists only if the employers participating in a retirement plan have a strong connection unrelated to the provision of retirement benefits. MEPs enjoy certain economies of scale and efficiencies that the participating employers would typically not experience if they were each responsible for their own retirement plan. As noted, RESA and the House retirement bill would allow completely unrelated employers to participate in an “open MEP.”
The EO directs DOL to clarify and expand the circumstances under which small and mid-sized businesses in particular may sponsor or adopt a MEP (which are referred to as Association Retirement Plans (“ARPs”) in certain Administration documents). DOL has already prepared a proposal that could be published as early as later this month. As the Administration is referring to MEPs as ARPs in certain documents, the proposal from the DOL may mirror in many respects the Association Health Plans regulation that was finalized earlier this year. Under that rule, the circumstances under which unrelated employers may join together to provide health insurance to their employees is fairly restrictive. Therefore, without a change from Congress, it is not anticipated that the proposal will allow open MEPs or very materially expand MEP availability.
MEP “one bad apple” rule. As noted, under the so-called one bad apple rule, if a single employer participating in a MEP violates the Internal Revenue Code’s retirement plan qualification rules, then the entire MEP may be disqualified, resulting in severe tax consequences for both the employers and participants. The EO directs Treasury to consider guidance that would provide relief from this result, so that only the employer violating the rules (and its participants) would be adversely affected. It is unclear if the Treasury relief will be as comprehensive or effective as the relief in RESA and the House bill.