MEPs provide large-company retirement benefits for the small-business market

By Jay Parrish

In today's regulated environment, small employers are competitively challenged by large competitors that have both the time and money to provide pre-tax retirement benefits that help attract and retain good people. While we all are aware of the impact of the Affordable Care Act on medical-insurance coverage, so too have radio dealers been turned off by the cost and personal liabilities of providing retirement benefits in any form.

Multiple-employer plans (MEPs) represent a way for employers that cannot afford—or don’t want to pay—the costs of administration, investments oversight and fiduciary responsibilities of pension plans or 401(k) plans for their employees to receive such benefits in conjunction with other employers in similar situations.

Because of the potential economies of scale, MEPs also have the opportunity to provide better investments performance and lower costs than single-employer plans. For this reason, MEPs could transform the structure of the retirement system for employers like radio dealers and open a new market for investment management and related services.

The traditional system places too great a responsibility on employers in terms of administration and fiduciary duties, including regulatory compliance and demands for investment expertise. Smaller employers often don’t have the resources to develop these capabilities. As a result, many forgo offering retirement programs or offer plans with higher costs and a potential for less-than-optimal performance for employees that participate.

There is no reason for participants to suffer lower retirement incomes because their employers cannot afford to meet the administrative and financial challenges of retirement plans when an option like MEPs might be available. Multiple-employer plans could contribute to expanding pension coverage and improve outcomes by providing more efficient administration and effective investment structure to better meet participant retirement-income goals.

While multi-employer plans generally are negotiated between employers and a union in a specific industry, this is not a requirement. MEPs can consist of employers in unrelated industries.

And MEPs don’t have to be one size fits all. With MEPs, employers could offer unique levels of investment selection and terms of contributions and benefits to participants to attract and retain employees. Individual employers could still have to comply with Employment Retirement Income Security Act (ERISA) requirements to ensure the benefits of the plans were fairly distributed among participants.