The Government Accountability Office (GAO) has released their report on Multiple Employer Plans. Officially, it is the Report to the Chairman, Committee on Health, Education, Labor, and Pensions, U.S. Senate on Private Sector Pensions: Federal Agencies Should Collect Data and Coordinate Oversight of Multiple Employer Plans.
The GAO says they did this study because:
“millions of U.S. workers lack access to employer-sponsored pension plans and that some small businesses, which offered plans at lower rates than large businesses, may be deterred by the cost of plan administration. MEPs, a type of pension plan maintained by more than one employer, have been supported as an option that could expand coverage by lowering administrative costs. For this report, GAO examined (1) the characteristics of private-sector MEPs, (2) the advantages and disadvantages of MEPs and how their perceived advantages are used to market them, and (3) how IRS and Labor regulate MEPs.”
The report is an interesting read because it does a good job summarizing the MEP industry at this point in time, and discusses the issues caused by lack of coordination between the IRS and the Dept. of Labor in regulating MEPs, including how the DOL issued two recent advisory opinions finding that open MEPs are not single employer benefit plans under Title I of ERISA, while the IRS has found at least one open MEP, operating since 2003, qualified for preferential tax treatment.
In the report, the GAO makes 3 recommendations:
- 1. the DOL lead an effort to collect data on the employers that participate in multiple employer plans;
- 2. the DOL and IRS formalize their coordination with regard to statutory interpretation efforts with respect to multiple employer plans; and
- 3. the DOL and IRS should jointly develop guidance on the establishment and operation of multiple employer plans.
The GAO notes that agencies generally agree with the GAO’s recommendations.
On a personal note, I’ve found one of the issues with trying to analyze the 5500 data on MEPs is that the plans are not great about marking the correct box on Line A of Form 5500 identifying the plan as a multiple employer plan. Form 5500 Line A contains 4 choices – a multiemployer plan; a single employer plan; a multiple employer plan; or a DFE.
Another option for identifying multiple employer plans might be through the IRS’ determination letter program. Rev. Proc. 2007-44 assigns multiple employer plans to Cycle B, which means that the plans are required to restate onto an updated plan document by Jan. 31, 2013. Even though it is not required, most, if not all, multiple employer plans will also file a determination letter application with the IRS, asking the IRS to review their plan document to ensure that it meets the IRS requirements for a Cycle B plan document stated in IRS Notice 2011-97. Maybe the first step toward coordinating efforts between the DOL and IRS when it comes to multiple employer plans is for the agencies to compare the plans which identify themselves as a MEP on Form 5500 with the number of plans which identify themselves to the IRS as a MEP when filing a determination letter application.