Increasing Access to Retirement Security

On August 31, 2018 President Trump issued Executive Order 13847, titled “Strengthening Retirement Security in America”. This Executive Order directed the Secretary of Labor to:

  1. Clarify and expand the circumstances under which small and midsize businesses may sponsor or adopt a multi-employer plan (MEP) as a retirement savings option for employees; and
  2. Increase retirement security for part-time workers, sole proprietors, working owners, and other entrepreneurial workers with nontraditional employer–employee relationships.

A proposed Rule was issued in October, 2018, and after an extensive comment period, where numerous suggestions were made, the Secretary of Labor issued a Final Rule, which was published in the July 30, 2019 Federal Register. This Rule is scheduled to become effective on September 30, 2019.

The Final Rule attempts to meet the goal of Executive Order 13847 by stating that the definition of employer under ERISA can include employer groups or associations and Professional Employer Organizations (PEOs), as long as the employer group, association or PEO satisfies specific criteria. Any group or association of employers, and any PEO that meet these criteria can establish a multi-employer defined contribution retirement plan (MEP). This allows different businesses to join together either through a group or an association that meets the criteria, to establish a multi-employer defined contribution retirement plan for all the employees of the various employers. Qualified PEOs can set up a MEP for the employees of their client employers or groups of their client employers. Regarding administration, a MEP files a single 5500 with a single audit. The DOL rule authorizes 401(k) or similar defined-contribution MEPs, through two approaches: (1) Association Retirement Plans (ARPs); and (2) Plans for Professional Employer Organization (PEOs) as described more fully below:

ARPs – Requirements for Groups or Associations of Employers

In order to take advantage of this broader interpretation of the definition of “employer”, a group of employers must be part of a valid association with a “substantial business purpose” in addition to merely offering employee benefits. This “substantial business purpose” test precludes a group of employers from combining exclusively for the purpose of sponsoring a multi-employer defined contribution plan. To qualify, a group or association must have a formal organizational structure with a governing body, operating under bylaws, so that it is controlled by its member employers.  Additionally, groups of employers need to have some commonality either in terms of their businesses or geography that allows them to demonstrate that they do satisfy the substantial business purpose required to join together in order to set up a MEP. Participation in the MEP through the association must be limited to employees and former employees of employer members. However, the group cannot be a bank, trust company, insurance issuer, broker dealer or other financial services firm, other than to the extent such an entity participates in the group solely as an employer member.

Requirements for PEOs

To qualify, PEOs must meet a series of requirements. The PEO must perform substantial employment functions on behalf of its client employers that adopt the multi-employer defined contribution plan, and must maintain adequate records relating to those functions. The PEO must also have substantial control over the functions and activities of the MEP as the plan sponsor, the plan administrator, and a named fiduciary of the MEP, so that it would continue to have employee benefit plan obligations to participants, even after a participant’s employer no longer contracts with the PEO. The PEO must ensure that each client employer that adopts the MEP acts directly as an employer of at least one employee who is a participant. Finally, the PEO must require participation in the MEP to be available only to employees and former employees of the PEO and client employers.


We see this as an exciting opportunity for small employers and for PEOs to be able to develop retirement plans for workers that have not previously been covered.  The establishment of MEPs by groups of employers and PEOs engaged in many businesses historically without retirement plans like the hospitality industry, local retail sales, and even professional services, could lead to a significant increase in the number of employees who are eligible to save for their retirement. Local Chambers of Commerce, trade associations, groups of merchants in a mall, neighborhood or business district, would be examples of groups of employers that could join together, especially if the association or group existed even before the establishment of the multi-employer defined contribution plan. PEOs that engage part time employees to work at their employer clients may also be incentivized to develop MEPs.

About the Author

Feel free to contact James B. Perry (phone: 313-223-3096; email: if you are an employer who may be interested in establishing a group or association of employers, in order to develop a MEP, or a PEO considering setting up a MEP.