New rule lets employers offer retirement plans through associations.
The Department of Labor announced a final rule over the summer that makes it easier for small businesses that belong to the same trade association to offer retirement plans to their employees. The rule allows association retirement plans (ARPs) to 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 went into effect September 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. “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 that professional societies should be viewed to meet the “commonality of interest” requirement needed to sponsor an ARP. As it did in issuing a rule last year expanding access to association health plans, the DOL determined 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 permit open multiple-employer plans. In an MEP, 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.