DOL Releases Final Rule on ‘Association Retirement Plans’

The Department of Labor (DOL) has issued a final rule to help more employers offer retirement savings benefits through association retirement plans (ARPs).

The rule, which will go into effect on September 30, will permit employers to connect with associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide to provide retirement plans for their employees. The DOL says the rule will allow small and midsized plan sponsors to offer competitive benefits packages similar to those of larger organizations, a resource usually unattainable for smaller businesses due to high costs and overwhelming paperwork.

“Less than a year ago, President Donald J. Trump signed an Executive Order focused on expanding quality, affordable workplace retirement plan options for America’s small businesses and their employees,” said Acting Secretary of Labor Patrick Pizzella. “Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans. Association Retirement Plans offer valuable retirement security to small businesses’ employees through their retirement years.”

With ARPs, businesses can join retirement plans without sorting through the filing and administration burdens, as the association handles this on behalf of small plans.

Under the rule, retirement plans may also be sponsored through professional employer organizations (PEOs), third-party human resources providers offering services to small and midsized plan sponsors. The DOL adds that the rule creates a safe harbor for PEOs, which offers clarity in administering retirement plans and in their role as PEOs. This includes “recruiting, hiring and firing workers of its client-employers that adopt the MEP [multiple employer plan],” and assuming “responsibility for and has substantial control over the functions and activities of any employee benefits which the service contract may require the PEO to provide,” according to the DOL. 

The proposed rule was first introduced last October and opened for a comment period, after President Trump had ordered the DOL to address the issue directly in an August 2018 executive order.  DOL officials state the final rule is mainly unchanged from the proposal, despite a more simplified PEO section and a switch from multiple safe harbor regulations to a single one. However, in response to an influx of commenters who requested additional information on open MEPs, the department has issued a 16-page request for information (RFI), set to publish on July 31, and open for comments until October 29.