Labor Department Proposes Association Retirement Plans

Acting on an executive order issued by President Trump in August, the Department of Labor has proposed a new rule to allow small businesses to pool together to offer retirement plans to workers.

Last week, the Department of Labor (DOL) announced proposed rulemaking to make it easier for small businesses to offer retirement benefits to their employees through association retirement plans (ARPs).

Under the proposal, ARPs could be operated by trade associations in a city, county, state, or multi-state metropolitan area—or in a particular industry nationwide. Sole proprietors and their families would also be permitted to join such plans. In addition to trade associations, professional employer organizations (PEOs) could sponsor a plan. PEOs are human resource companies that contractually assume certain employment responsibilities for clients.

By permitting these new plan arrangements, DOL expects that small businesses can reduce administrative costs and offer benefit packages comparable to those offered by large employers. According to DOL, nearly 38 million private-sector workers are not currently offered employer-based retirement plans.

“Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans,” said Labor Secretary Alexander Acosta in a press release. “Association retirement plans give these employers a simple and less burdensome way to offer valuable retirement benefits to their employees.”

The proposed rule, which comes less than two months after President Trump signed an executive order instructing the Department of Labor to look into the plan, has been welcomed by business groups.

“This proposal will expand retirement savings opportunities for millions of small business employees,” said Aliya Wong, executive director of retirement policy at the United States Chamber of Commerce, in an article in The Hill.

The rule, she added, will also help small businesses compete with larger employers in offering benefits.

(designer491/iStock/Getty Images Plus)

Chris Vest, CAE

By Chris Vest, CAE


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