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

What does this mean? Imagine you work for a small company throughout your career and you had made contributions of 10% and your employer contributed 6% of your income. Under previous plans, you are paying somewhere between 2.5-3.5% per year in fees to a service provider that you did not choose. In contrast, only 1% in fees are passed to the participant in a large-employer plan.

Accumulate that fee difference over 30 years, and you have lost a sizable nest egg because you worked for a small employer, not a large one.

This is where the MEP brings value to the employer and employee. By leveraging the combined size of several companies to reduce costs and increase the level of performance equal to that of large-company plans, the MEP creates an even playing field for smaller businesses, like radio dealers.

Given these attributes, the MEP concept makes a lot of sense for our typical small firms. Interestingly, the federal government has suggested something along these lines as a universal MEP, albeit using after-tax dollars and only allowing investment in government-sponsored, low-interest Treasury notes. 

The fee-based adviser that supports this kind of platform has been in your shoes and understands your concerns. The primary focus for the service providers—the bank/trust/custodian company, third-party administrator (TPA) and recordkeeper, fund managers—is the employer and its employees, the end users of the plan.

Jay Parrish is president of JLP Investments, an independent-adviser company that works through a broker-dealer Dempsey Lord Smith to provide financial products and services to small businesses. He can be contacted at (850) 236-6340 or [email protected].