Is the Time at Hand for 'Open Meps' - repost from Unified Trust Blog

Time and timing are funny things.  A good idea may be a good idea, but the timing of that idea can be everything.  Back in 2010 and 2011, it seemed like I couldn’t have a conversation with an advisor or go to an industry conference without hearing about so-called ‘Open Multiple Employer Plans’ or ‘Open MEPs’.  At first, they almost sounded fake to me, as we in the industry have a tendency to create marketing or sales terms.  Of course, I was aware of MEPs, but only in the context of what we’re now calling ‘closed’ or ‘traditional’ MEPs.  The concept behind a MEP was always that the related business’ sharing some kind of a nexus or commonality could essentially join into the same retirement plan.  By banding together, economies of scale had the potential to provide better investments, lower fees and less fiduciary risk-all good benefits.  The nexus was important as it kept this exclusive to related or very similar entities.

There had been  a lot of noise in the market that Open MEPs, where this commonality didn’t exist, were also okay.  This struck me as odd.  Did the rules change when I wasn’t paying attention? I don’t think so.  I’ve come to the conclusion that what did change was that the market decided that the existing rules weren’t clear enough. There was a disconnect between what was written into ERISA on MEPs and what was absent in the Internal Revenue Code about MEPs.  Because of this lack of continuity, some aggressive players in the market went ahead with the Open MEP idea, taking the position that if it isn’t explicitly prohibited, it was therefore permitted.  I remained skeptical and even wrote about it on my personal blog (MEP’s EBSA Speaks and More Opinions).  Then in May of 2012, the Department of Labor issued the TOTH Letter, DOL Advisory Opinion 2012-04A.  With this stroke of the pen (or keyboard), all of the noise in the market quieted down.

Flash forward four years and this concept is again at the forefront of the conversation.  In fact, a version of Open MEPs, now being called Pooled Employer Plans (PEPs) is close to becoming a legal structure.  Prior to the election, I was interviewed on this subject (Multiple Employer Plans Have a Bright Future) and discussed whether or not this idea would have its day.  The creation of these new PEP plans is part of a bill that was marked up by the Senate Finance Committee in September called The Retirement Enhancement Savings Act of 2016.  This bill supports the notion of an Open MEP, now being called a PEP, effectively removing the nexus requirement if certain conditions are met.  Timing is everything and now the question really is, when will this bill get passed?  It has made it through Senate Finance unanimously (a very rare occurrence) and has bipartisan support.  At this point, it seems that the only decisions left to be made are regarding  what broader piece of legislation will this Act be attached to and which president will get the credit for it, Obama or Trump.

Professionally, I find this exciting.  As readers know, Unified Trust Company is a professional ‘named fiduciary’ in our role as Discretionary Corporate Trustee over retirement plans.  Within these new PEP requirements are the appointments of a “pooled plan provider”, a ‘named fiduciary’ to act as the plan administrator and one or more named trustees who “must be  a bank or other financial institution” that would be responsible for contributions and assets.  Unified Trust would be a great fit potentially for some of these roles.  Whether these come to fruition sometime soon or not, the future is looking very bright.

- Jason Grantz

Will he or won't he....put the Kibosh on the DOL Fiduciary Rule - Trump I mean

Of all of the words in the English language that I never thought would appear on my blog, the name; Donald Trump would be at the top of that list.  Yet, here it is!!!   The following is a post where I will discuss my initial thoughts of a republican congress and a Donald Trump presidency as related to the retirement plan industry and retirement policy.  This falls into two categories.  First, will this now party-aligned legislative body pass retirement legislation (almost certainly, yes) AND will this new regime seek to unwind any of the previous regime's legislation and regulation.....again, almost certainly yes. 

Regarding the first part, tax reform is almost a veritable certainty to occur in the first couple of years of the Trump presidency.  With that will occur other tax policy initiatives and some of the one's related to retirement and pension reform have been kicking around for a while.  Will it be the most recent one, The Retirement Enhancement and Savings Act of 2016  or something similar?  My guess is yes.  This calls for a re-imagining of the rules around Multiple Employer Plans (MEPs) into something new called Pooled Employer Plans or PEPs.  This concept is similar to what the industry has been tauting for years as Open MEPs.  Here is a link to the full mark-up from the Senate Finance Committee. RESA 2016 Full Description.

Regarding the new Department of Labor (DOL) Fiduciary Rules.  I've seen/read a lot in the last few days about how this regime is going to squash these rules since they aren't friendly to the financial services industry which is largely aligned with the republican side of the debate.  However, killing a regulation once it's enacted is very difficult to do, it's not like the DOL (assuming new leadership) could just pull it, nor could they subject it to changes without a review and comment period.  This would take us well beyond the upcoming implementation date of April 10. 

So if they were to do this, it would have to be done with an overriding interim regulation or some longer term solution where it gets scrapped as an add-on to a future piece of legislation or just simply delaying implementation of it past April 10th as something to deal with later on.  One thing I find  interesting, is that Trump himself has never spoken about it publicly and his website is silent on the matter altogether.  So whether it is a high priority of the new administration or not remains to be seen, but even if it is a high priority, my expectation is that April will come and go and this new DOL rule will be enforceable at that time BY the private sector. 

For how long after.......time will tell.

- Jason Grantz, QPA, AIFA

 

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