Can 403(b) Plan Sponsors Join a MEP or a PEP?

Q: Can 403(b) plan sponsors join a MEP or a PEP?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Yes, Section 106 of the SECURE 2.0 Act allows 403(b) plans to participate in multiple employer plans and pooled employer plans, effective for plan years beginning after December 31, 2022.

Importantly, a PEP or MEP provider cannot offer a MEP that includes both 401(k) and 403(b) plans. Additionally, 403(b) plans that join a MEP or PEP may not be able to merge their existing, stand-alone 403(b) plan into the MEP due to annuity contract portability restrictions such that an employer might have to continue administering a single-employer 403(b) plan even after joining a MEP or PEP.

 In short, while a 403(b) plan may participate in a MEP or a PEP, plan sponsors should consider pros and cons of joining a MEP or a PEP.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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