3770 / What do employers evaluating the MEP options have to know about various plan options after passage of the SECURE Act?

Beginning in 2021, under the SECURE Act, employers can to offer MEPs, association retirement plans (ARPs) and pooled employer plans (PEPs). Clients should understand the difference between the type of MEP available pre-2019, the MEP structure created by the 2019 DOL regulations and the different MEP rules that apply beginning in 2021 under the SECURE Act. Technically, these are all different types of plans with different requirements that must be evaluated. The DOL-created plans have been called “association retirement plans” (ARPs) to differentiate from the original “closed” MEP, and to clarify that ARPs must satisfy additional criteria in order to be treated as qualified plans. Under the SECURE Act, MEPs are also called pooled employer plans (PEPs)—another name for a type of MEP that meets certain additional requirements to avoid the commonality of interest requirement and one bad apple rule.

Pre-2019, to participate in MEPs, all participating employers were required to share some strong type of common interest separate and apart from the retirement plan itself. The need to share some type of affiliation or participate in the same industry sharply limited the availability of the “original” MEP—also called a “closed” MEP.

The basic premise behind the idea of MEPs has remained the same—multiple small businesses join together to reduce the administrative burden and potential fiduciary responsibilities of offering a 401(k)-type retirement plan. The DOL 2019 regulations expand MEP availability if certain criteria are satisfied. Some in the industry began referring to these new MEPs as association retirement plans (ARPs) to differentiate from the original “closed” MEP, and to clarify that ARPs must satisfy additional criteria in order to be treated as qualified plans. Essentially, the ARP is a type of MEP, and the terms have mostly been used interchangeably.