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Multiple Employer Plans (MEP)

A multiple employer plan (MEP) is a qualified retirement plan sponsored by two or more employers where at least two of the sponsoring employers are not members of the same control group.
 
Reasons for Choosing a Multiple Employer Qualified Retirement Plan
 
This type of plan is commonly utilized by leasing organizations or professional employers organizations (PEOs) and the individual corporate adopters are clients of such organizations. This allows a leasing organization or PEO to market a convenient retirement solution to their clients at potentially lower costs and a promise of less client involvement in day-to-day administration.
 
This type of plan may also be used where unrelated employers have a business relationship due to sharing a common industry or field of business. These businesses may have employees moving between each business due to this relationship. Having a single plan will help lessen the burden of transfers between plans, save expenses, and reduce fiduciary exposure to both businesses by not running multiple plans.
  • Lower costs: Consolidating two separate plans into one can potentially save the participating employers only on the expenses incurred with operating two plans These savings may consolidate:
    • Independent auditors' fees
    • DOL Form 5500 fees
    • Plan valuation service fees
    • Plan document fees
  •  Buying power: Consolidating retirement assets under one investment provider may give the consolidated plan more power to negotiate better pricing and/or levels of servicing with the appearance of one plan with greater asset value.
  •  Fiduciary exposure: Often related (but not controlled group) companies find themselves involved in discussions about employment transfers and subsequent requests to move employee account balances from one plan to the next. With all funds for both plans being remitted to one plan investment contract, no fund transfers require trustee authorization.
Plan Design
 
Multiple employer plans maintain one plan document that lists all the companies involved as participating employers. Ascensus Consulting offers a pre-approved Volume Submitter plan document through SunGard Relius (TM) that can accommodate this type of plan design. The plan document allows individual participating employers to have their portion of the plan be defined to their specific intentions for:
  • Classes of eligible employees
  • Conditions for eligibility (including by source of money)
  • Entry dates of participation
  • Vesting schedules for employer match or profit sharing
  • Election of safe harbor status
  • Employer match provisions
  • Employer profit sharing provisions (including prevailing wage contributions)
  • Actual deferral percentage/Actual contribution percentage (ADP/ACP) testing provisions
  • Participant loans
Please note: our document has the ability to define allocations and contributions to be calculated either jointly, with all participating employers included, or determined separately. The document may also define other provisions (not listed above) separately by employer, but may require the plan to file for a determination letter from the Internal Revenue Service.
 
Points to Consider
  • A multiple employer plan is more complex than a single employer plan. The deduction limits and nondiscrimination testing are performed individually for each adopting employer. Keeping a close watch of ownership changes in the businesses within the plan is important because it impacts how Ascensus Consulting will perform the required annual testing. The plan document can accommodate multiple employer plans tested separately or together because of a control group status, but the plan sponsor must notify Ascensus Consulting of ownership changes in a timely manner to help ensure that annual valuations will be conducted accurately.
  • Consolidation of multiple retirement plans into one overall plan can save money for the plan sponsors involved; however, the savings can vary depending on the circumstances for each individual plan. As an example, taking two smaller plans (not subject to audit requirements) and combining  them into a larger single plan could then add the expenses of an independent auditor's report.
  • A multiple employer plan should not be confused with multi-employer plans. A multi-employer plan is a plan maintained through a collectively bargained process in which more than one employer participates. Generally, these employers are often related enough to be considered a single employer for purposes of offering a retirement plan to union employees in similar industries.
Contact us for more information.