On Friday, August 31, President Trump signed an Executive Order directing the Department of Labor (DOL) and the Treasury to review and consider issuing regulations regarding increasing access to workplace retirement savings arrangements. The Executive Order (EO) notes the lack of retirement plan coverage among small employers and cites the cost and administrative burden associated with maintaining qualified retirement plans as a key factor.
The EO references association retirement plans (ARPs), commonly known as multiple-employer plans (MEPs). These plans permit employers to band together and offer retirement plans under pooled arrangements. Under current DOL rules, the participating employers must share some common interest. As a result, MEPs are most commonly offered by trade associations, such as the American Bar Association, to members in a common industry. Under the EO, the DOL would consider issuing new regulations allowing completely unrelated employers to join an MEP. The intent is to allow small employers who join together under an MEP to enjoy economies of scale that would lower their costs as well as the benefit of working with a pooled provider who would assume many of the plan’s administrative burdens.
Another roadblock to current MEPs has been the Treasury’s position that if one participating employer has a disqualifying event, the entire MEP is disqualified and all participating employers impacted. This position is commonly known as the “one bad apple” rule. Treasury could reevalute and consider eliminating this rule.
Such “open” MEPs have long enjoyed bipartisan support. In September 2016, the Senate Finance Committee unanimously approved the Retirement Enhancement and Savings Act (RESA). One of the key elements of RESA was language that would have eliminated both the commonality requirement and the one bad apple rule. RESA was reintroduced in the Senate earlier this year, and a companion bill has been introduced in the House.
The EO also addresses a couple other issues. The Treasury is directed to review the rules regarding required minimum distributions that currently require plan and IRA distributions to begin once a retiree reaches the age of 70½. The Treasury would look at modifying its current life expectancy and distribution tables to allow retirees to spread their distributions over longer periods of time. In addition, the EO asks both the DOL and the Treasury to consider how current plan notice requirements could be changed to reduce paperwork and ease administrative burdens.
Presumed next steps will be for the DOL and the Treasury to commence their reviews with the goal of proposing new guidance around these issues. In the interim, Congress may continue to consider the passage of RESA.