In
St. Lucie County, Florida, police
saw a man sitting in his car in a parking lot. The man revved the engine and
started speeding away in reverse, but nearly crashed into a pillar. Deputies
spoke to the man, who had a pack of be.er in the front seat. They also saw an
open Budw.eiser in the cup holder, but the man denied it was there. During field
sobriety exercises, he said, “There is no doubt that I am impaired.” There is also
no doubt the man was arrested on a D.UI charge.
In Finleyville, Pennsylvania, a man has been
charged with as.sault—over a Big Mac. According to the Associated Press, police
responded to a call to a home shared by two brothers. Apparently one brother
returned home to find that the other had eaten all three Big Mac sandwiches
that were in the house and didn’t save him one. He began knocking over
appliances and furniture and throwing food. He also beat his brother, bruising
the man’s right eye and left cheek, and cutting his ear.
In a conversation with PLANSPONSOR, Russell Investments’ chief research strategist suggests momentum is building for “open” multiple employer plan expansion.
Bob Collie, chief research strategist with Russell
Investments, is squarely among the camp of retirement plan experts who favor a determined
expansion of the multiple employer plans (MEP) system.
He is quick to point out that MEPs are distinct from multiemployer
plans, which are generally run by an independent board on behalf of labor
unions or other related employee groups. Instead, multiple employer plans are
established under ERISA 413(c) and have historically have been used by
companies that share a common industry or payroll provider—primarily
professional associations and other related employer organizations.
Collie tells PLANSPONSOR that serious interest is building
around MEPs, especially a new generation of “open” MEPs for unrelated companies.
Currently, fiduciary hurdles prevent wider use of the open MEP plan design, but
he feels some additional guidance from the Department of Labor (DOL) would turn
cautious curiosity about open MEPs into unbridled enthusiasm.
“I think it’s safe to say that until now, MEPs have had the
lowest profile of all the plan structures allowed under ERISA,” Collie
explains. “One of the main reasons we are seeing the conversation build around
MEPs largely has to do with the focus being paid to the coverage gap.
Despite all the improvements the Pension Protection Act and other reforms have brought to the retirement space, we have clearly not done enough to simply
improve access. It’s going to take a different kind of reform.”
Collie says, despite all the attention paid to money and
financial issues in this country, workplace retirement plan access in the U.S.
is still relatively dismal. He pins the top-level U.S. figure for retirement
plan access—across all professions and industries—right around 50%.
“We have done a lot to improve the plans that already exist,
but overall access is way too low,” he says. “Workers in certain sectors of the
economy are still at a sharp disadvantage in terms of access to affordable
investments and the fiduciary support that comes from investing in a qualified
plan.”
NEXT: MEPs the only
answer?
Collie says it’s hard to see how this 50% coverage gap could
shut without an expansion of an open MEP system. So many U.S. workers currently
lacking access to retirement plans are employed by small businesses, he says,
which have nether the time nor the monetary resources to start up a traditional,
single employer 401(k).
“There has been a lot of suggestion lately that MEPs are really
going to be the best way to get out of this problem,” Collie says. “People are realizing
MEPs have a lot of potential to make it easier for small employers to give
their employees access to a plan at work—without have to take on a whole lot of
administrative responsibility.”
Of course, small businesses will not be able to offer retirement
plans to their employees without taking on some level of fiduciary responsibility.
“The fiduciary duty will be there, and there will be some
costs for the employer, but the ease of use is attractive in open MEPs,” he
says. “Ideally, the small business owner can fully outsource the plan administration,
and they will simply have to monitor the third-party provider that is doing the
heavy lifting of running the plan.”
Collie goes on to suggest that, were the DOL to add a clear safe
harbor provision about how fiduciary liability is to be assigned within an open
MEP, with a clear set of requirements for selecting and monitoring a provider,
it would be a huge step towards improving overall plan access. He points to Australia as a “major success story in open MEPs.” As Collie explains, that country has a near-universal system of open MEPs. The open plans have become so popular that it's actually becoming rare to see a plan sponsored by a single employer.
“Why shouldn’t we want these small employers to go to a professionally managed, centralized plan?” Collie asks. “It’s a reasonable idea—you get a lot of scale
potential here and great potential institutional pricing, even for the smallest
employers. These aren’t new ideas I’m talking about, but they are getting more
attention in practice.”
NEXT: Hurdles remain
Collie says the single biggest barrier that remains for wider
use of MEPs is the stance that has been taken by the DOL, especially towards
open MEPs. Specifically, he feels the DOL must update its thinking on how it treats
a MEP when there is not a strong level of connection between the employers.
“Currently, there are questions about the so-called open
multiple employer plans,” Collie explains. “These plans share a common type of
worker or industry, so the DOL at present doesn’t really treat them as a single
plan. The few open MEPs that exist are treated more as a collection of single
plans that function together. This increases the administrative burden and
really reduces the benefits of an MEP.”
Collie points to a recent report from the U.S. Senate Committee on Finance's
Savings and Investment Bipartisan Tax Working Group, which highlighted the
issue of a lack of government support for open MEPs.
“When that report came out from the tax working group in the
Senate Finance Committee, they said they want to encourage open MEPs, but they aren’t
sure it’s possible for these open plans to occur under the DOL’s regulations,”
Collie says. “As far as I can tell, the reason the DOL is so entrenched in
opposition to open MEPs is that they feel it is necessary for consumer protection.”
Collie says he was surprised to learn this when he started looking deeper into the issue in recent months.
“It really surprised me, because they seem to believe that, so
long as there is some sort of connection between employers in an MEP, that
somehow also means they are going to be better at managing the plan and
protecting people investing money in the plan,” he explains. “But to me, this is
pretty arbitrary. If consumer protection is a goal, we should be more concerned
about the expertise of the people running the plan and their dedication to their
employees—it’s not a question of what industry someone is in, whether they will
be a good plan steward.”
Collie concludes that “it will be interesting to see how the
ongoing fiduciary rule debate impacts all of this. Much of that
debate is centered on conflicts of interest and consumer protection goals. Providers
may gain more of a sense on what they’re going to be responsible for, both in
open MEPs and serving retirement plans in general.”