Empower Views Open MEPs as a Solution for the Coverage Gap

In “Open MEPs: A Promising Way to Narrow the Coverage Gap,” Empower Institute reveals that 66% of small businesses that currently do not offer a retirement plan say they would do so through an open multiple employer plan (MEP).

Empower says that 33% of U.S. households are not eligible for an employer-sponsored retirement plan. “Workers who aren’t eligible  to participate in a workplace plan face difficulty matching the savings of workers who are enrolled in a sponsored plan,” Empower says in its report. “For example, U.S. households eligible for a plan are on track to replace 79% of their income in retirement while those that aren’t eligible are on track to replace just 45% of their income in retirement.”

What keeps small businesses from offering a retirement plan are the expenses and complexity, Empower says. “Open MEPs, which have widespread support across the retirement industry, provide an appealing way to bridge the coverage gap. In fact, open MEPs were at the top of the Defined Contribution Institutional Investment Association’s [DCIIA] wish list for improving retirement readiness.”

Currently, the Congress and the executive branch are considering proposals that would permit companies to participate in an open MEP without having a common nexus, i.e. being in the same industry, trade, line or business or region.

“Many industry watchdogs are optimistic that there will be some progress toward open MEPs in the near future, making them accessible to more employers, and, by extension, more employees,” Empower says.

Asked why they would consider offering an open MEP, 304 small businesses said it’s the right thing to do (63%), to retain employees (59%), to attract the most talented employees (59%), to offer a benefit that not many small businesses offer (48%) and to be able to hire in a tight job market (37%). Additionally, 36% said they would consider offering an open MEP because they personally need a retirement plan.

Asked what they viewed as the positive components of an open MEP, 55% said lower costs for their organization, 54% said lower costs for their workers, 49% said a variety of fund options, 49% said the help of financial professionals,, 47% said lower liability risk for their organization, 39% said administrative support for their benefits staff, 43% said fiduciary support, and 30% said protections under the Employee Retirement Income Security Act (ERISA) for all employees.