Until a new DOL rule announced this week, association retirement plans can be offered by associations of employers in the same city, county, state, or metropolitan area—or by a particular industry nationwide.
The Department of Labor announced a final rule this week that makes it easier for small businesses that belong to the same trade association to offer retirement plans to their employees.
Under the DOL rule, association retirement plans (ARPs) could be offered by associations of employers in the same city, county, state, or metropolitan area—or by a particular industry nationwide.
By expressly permitting these new plan arrangements, the administration is enabling small businesses to offer retirement benefit packages comparable to those offered by large employers. The rule is expected to reduce administrative costs through economies of scale and strengthen small businesses’ hand in negotiations with financial institutions and other service providers. The rule is effective Sept. 30, 2019.
“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 Acting Secretary of Labor Patrick Pizzella in a press release. “Association retirement plans offer valuable retirement security to small businesses’ employees through their retirement years.”
ASAE endorsed expanded access to ARPs in comments filed with the DOL last December. While the new rule is a step in the right direction, ASAE had argued in its comments that professional societies should be viewed to meet the “commonality of interest” requirement needed to sponsor an ARP.
Similar to its rule last year expanding access to association health plans, the DOL construed that eligibility to sponsor an ARP should be limited to associations of employers.
The release of the DOL rule is spurring more calls for passage of the SECURE Act, a bill that would go further than the DOL rule by permitting open multiple employer plans (MEPs), whereby unaffiliated employers could participate in the same retirement plan without having a common nexus, such as belonging to the same industry or trade association. The SECURE Act passed the House 417-3 in June but has stalled in the Senate.