Final rule on ‘association retirement plans’ released by DOL

The final regulation expands the use of multiple employer plans to provide workplace retirement benefits

On July 29, the Department of Labor (DOL) issued a final rule intended to expand the use of multiple employer plans (MEPs) to provide workplace retirement benefits.

The final regulations modify the DOL’s long-standing interpretation of “employer” as defined in the Employee Retirement Income Security Act of 1974 (ERISA) to provide an additional mechanism for groups and associations of employers to maintain a MEP. The DOL refers to this type of MEP as an “association retirement plan” (ARP).

The final regulation largely follows the proposed regulation issued in October 2018 by retaining the commonality of interest requirement (either through a common industry/trade/business or a common geographic area) for participating employers, and like the proposal, prohibits financial services firms from sponsoring a group or association MEP (except to the extent a financial services firm participates in a MEP as an employer member of the group or association).

The final rule also establishes criteria that must be met for a professional employer organization (PEO) to sponsor an ARP. (A PEO is an entity that generally contracts with its client employers to perform functions that are typically performed by an employer, such as payroll, tax compliance and human resource management.) The final rule further notes that working owners without employees, including sole proprietors, can participate.

By expressly permitting these new plan arrangements, the DOL says the rule enables small businesses to offer benefit packages comparable to those offered by large employers, and that it “expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses’ hand when negotiating with financial institutions and other service providers.”

How does this rule compare to other retirement bills?

The final rule is in most respects narrower than the MEP provisions that are included in the Setting Every Community Up for Retirement Enhancement (SECURE) Act, a comprehensive retirement bill we’ve written about before which was overwhelmingly passed by the House in May. The most notable example is that the SECURE Act and other bills would allow completely unrelated employers to participate in a MEP (often referred to as an “open MEP”). Open MEPs are not addressed within the final rule itself, although some trade groups had suggested to the DOL in earlier comment letters that in preventing the use of open MEPs, the proposal would be unlikely to have a significant impact on coverage.

The preamble to the final rule, however, recognizes that there is significant support for open MEPs, as expressed through the comments received in response to the original proposal and through the bipartisan support for the open MEP provisions contained in the SECURE Act. In response to this support, the DOL concurrently published a request for information (RFI) on open MEPs. The RFI is intended to further develop the public record on a broad range of issues related to open MEPs, including (for example) whether the DOL should permit open MEPs, whether the DOL should permit financial institutions to sponsor a MEP, and whether any limiting conditions to mitigate potential conflicts would be appropriate.

The new rule is effective on Sep. 30 and is generally seen as incremental progress toward the eventual establishment of open MEPs.

Meanwhile, the SECURE Act (with its open MEP and numerous other retirement-related provisions) has the best chance to be enacted if it’s attached to other “must pass” legislation, such as the appropriations bills with funding for government agencies slated for late September, or a spending bill “mega package” planned for December. Its path forward in the Senate as a stand-alone bill is still blocked by a handful of Senators at this time.

We’ll keep you posted.


PlanSponsor, “DOL releases final rule on ‘association retirement plans’,” Amanda Umpierrez, July 30, 2019

Investment News, “DOL rule enables small businesses to offer retirement plans through trade associations,” Mark Schoeff Jr., July 29, 2019

Investment Company Institute, “Association Retirement Plans,” Elena Barone Chism, July 29, 2019

NAPA Net, “DOL unveils final rule on association retirement plans,” Nevin E. Adams, JD, July 29, 2019 SPARK Institute, “Association retirement plan final rule,” Michael L. Hadley, July 29, 2019

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Jon Vogler
Senior Analyst
Retirement Research, Invesco Consulting

Senior Analyst Jon Vogler draws on extensive pension expertise to offer retirement thought leadership for Invesco. In addition to writing Invesco’s Retirement blog, he tracks legislative and regulatory developments and contributes as a writer and editor to a variety of retirement-related Invesco communications.

Prior to joining Invesco in 2008, Jon spent more than 25 years in the research, writing, compliance and underwriting areas of the retirement services industry, including roles as a senior consultant at Mutual Benefit Life’s pension consulting firm and as a compliance manager in the Automatic Data Processing retirement services division.

Jon earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He has a B.A. in History from Rutgers, The State University of New Jersey.

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