MULTIPLE EMPLOYER AGGREGATION PLANS (MEAPs)
What are these plans, and why are they in the news recently?
It started with the SECURE act signed by President Trump in December 2019. Securing Every Community for Retirement Enhancement. Without going through all the provisions, the main goal was to help employers overcome the challenges of offering and administering a workplace retirement plan.
MEAPs allow companies with no business nexus or no similarity in ownership, industry, etc. to enroll in a pooled (aggregated) 401k plan. MEAPs utilize the economies of scale of much larger plans while keeping the flexibility in offering their own specific plan provisions to enable and assist their employees in meeting their retirement goals.
There are a few options in the marketplace for these plans, but the one we like the most by far is a pooled group plan with over 2000 other businesses and 2 ½ billion of assets managed by Tag Resources out of Knoxville, Tennessee.
These plans aim to offer a lower cost solution while also lowering the business owner's legal liability for offering a plan. How do these plans do it? They are a plan with a set lineup of service providers, so the moving parts are limited.
One Third Party Administrator (TAG Resources) oversees all the typical TPA services but is also designated by the business owner as the 3(16) and 402(a) administrative fiduciary to handle the vast majority of the business owner's responsibilities. There is also a designated 3(38) investment fiduciary conducting the investment oversight for the business owner. By adding these auxiliary service providers, the Business Owner is reducing their responsibility while eliminating most of their liability.
Businesses need a retirement plan to be able to retain and compete for talent. The goal of the SECURE Act is to make it easier and more attractive for business owners to offer these plans. The marketplace is seeing it play out exactly that way, so it is a testament to our leaders for putting forth something that is serving the public good as intended.
We project that these plans will be the most popular option for small businesses going forward. In the past year we have seen exponential growth and popularity in multiple employer aggregation plans.
Securities and advisory services are offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered by DiMatteo Group – Financial Services are separate and unrelated to Commonwealth. The material provided is for general information purposes only and does not constitute either tax or legal advice. DiMatteo Group is located at 79 Bridgeport Ave., Unit #1, Shelton, CT 06484. For questions, please give us a call at 203-924-5420.