When the Dept. of Labor released Advisory Opinion 2012-04A – Multiple Employer Plans on May 25, 2012, addressing whether the Dept. of Labor would view a multiple employer plan as a single employee pension plan within the meaning of ERISA section 3(2) where multiple unrelated employers adopt the Plan to provide retirement benefits to their employees, the DOL said that “it has been the Department’s consistent view that where several unrelated employers merely execute identically worded trust agreements or similar documents as a means to fund or provide benefit, in the absence of any genuine organizational relationship between the employers, no employer group or association exists for purposes of ERISA section 3(5).” In making this determination, the DOL exercised its authority to interpret ERISA. The DOL does not have the authority to make changes to ERISA, Congress does.
Congress is considering changing ERISA section 3(2). Section 14 of the H.R. 1534, the Small Businesses Add Value for Employees Act of 2011 (SAVE Act of 2011) adds this paragraph to ERISA section 3(2):
‘‘(C) A plan, fund, or program shall not fail to be treated as an employee pension benefit plan solely by reason of the plan, fund, or program being established or maintained by two or more employers whose only relationship is participation in the same plan, fund, or program. This subparagraph shall only apply to a plan, fund, or program that provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account.’’.
The SAVE Act of 2011 also creates a new type of plan – the Multiple Small Employer Plan – effective for years after Dec. 31, 2011. Section 13 of H.R. 1534 says:
(a) In General. Paragraph (11) of section 401(k) of the Internal Revenue Code of 1986 is amended by adding the following at the end thereof:
(E) MULTIPLE SMALL EMPLOYER PLAN.
(i) IN GENERAL- In the case of a plan described in clause (ii)–
(I) the amount described in subparagraph (B)(i)(I) shall be $10,000, in lieu of the amount in effect under section 408(p)(2)(A)(ii),
(II) such $10,000 amount shall be adjusted as described in section 408(p)(2)(E)(ii) except that the base period taken into account shall be the calendar quarter beginning July 1, 2011,
(III) subclause (II) of subparagraph (B)(i) and clause (ii) of subparagraph (B) shall not apply, and
(IV) section 414(v) shall not apply.
(ii) PLAN DESCRIBED- A plan is described in this clause if the plan satisfies the following requirements:
(I) Such plan satisfies the requirements of this paragraph, as modified by clause (i).
(II) The plan is described in section 413(c).
(III) The plan includes a qualified automatic contribution arrangement, as defined in paragraph (13), except that subparagraph (D) of paragraph (13) shall not apply and the qualified percentage shall be determined by reference to subclauses (I), (II), (III), and (IV) of paragraph (13)(C)(iii).
(IV) The plan does not permit any participant or beneficiary to receive or maintain a loan from the plan.
(V) The plan does not permit hardship distributions described in paragraph (2)(B)(i)(IV) except to the extent any such distribution is deemed, under regulations prescribed by the Secretary, to be on account of an immediate and heavy financial need of the employee and necessary to satisfy an immediate and heavy financial need of the employee.
(VI) The plan is maintained pursuant to a model plan document published by the Secretary.
(1) MODEL PLAN- Within one year of the date of the enactment of this Act, the Secretary of the Treasury shall publish a model plan that may be used to satisfy the requirement of subclause (VI) of section 401(k)(11)(E)(ii) of the Internal Revenue Code of 1986.
(2) PROTECTION AGAINST LOSS- Within 120 days of the date of the enactment of this Act, the Secretary of Labor shall amend Department of Labor Regulation section 2550.404c-5(e)(4)(iv)(B) so that, in the case of a plan described in section 401(k)(11)(E) of such Code `four years’ shall be substituted for `120 days’.
(3) CLARIFYING DUTIES AND REDUCING BURDENS- Within one year of the date of the enactment of this Act, the Secretary of Labor shall–
(A) publish rules clarifying the extent to which the fiduciary duties of a participating employer and of a named fiduciary with respect to a plan described in section 401(k)(11)(E) of such Code are limited to prudently selecting and monitoring the provider of such plan and the services, fees, and investment options available from such provider, and
(B) prescribe interim final regulations providing simplified means by which plans described in section 401(k)(11)(E) of such Code may satisfy the requirements of sections 102, 103, and 105 of the Employee Retirement Income Security Act of 1974.
(4) ELIMINATION OF DISINCENTIVE TO POOLING- Not later than one year after the date of the enactment of this Act, the Secretary of the Treasury shall prescribe final regulations under which a plan described in section 413(c) of such Code may be treated as satisfying the qualification requirements of section 401(a) of such Code despite the violation of such requirements with respect to one or more participating employers. Such rules may require that the portion of the plan attributable to such participating employers be spun off to plans maintained by such employers.
The SAVE Act of 2011 was introduced by Rep. Ron Kind (WI) on April 14, 2011 and is currently pending before the House Subcommittee on Health, Employment, Labor, and Pensions.