Current Thinking

What is a Multiple Employer Plan (MEP)?

A Multiple Employer Plan, or “MEP”, is a retirement plan that is maintained by two or more unrelated employers that are not members of the same controlled group. Employers are characterized as “Adopting Employers” when they elect to participate in the MEP. MEPs can be Defined Contribution (DC) or Defined Benefit (DB) plans.

Section 413(c) of the Internal Revenue Code and the regulations thereunder establish guidelines for Multiple Employer Plans. A MEP is essentially a single qualified trust established by the plan sponsor that allows unrelated co-adopters to adopt the plan. Under a MEP, each adopting employer can maintain an individual plan design, and compliance testing is performed on an individual basis for each adopter. A significant advantage of a true MEP is that only a single Form 5500 for the overall plan has to be completed and filed for all participating employers and only a single audit for the overall plan has to be conducted.

The United States Department of Labor (the “DOL”) has taken a more restrictive view of when a MEP will constitute a single plan for purposes of the Form 5500 and plan audit requirements. DOL rulings indicate that a MEP must cover a bona fide group of employers to constitute a single plan. According to the DOL, in order to constitute a bona fide group of employers, there must be a nexus among participating employers, such as an industry connection or a pre-existing relationship, and the participating employers must have control over the plan. In May of 2012, the DOL issued two advisory opinions in which the DOL took the position that an open MEP (i.e., a MEP that covers unrelated employers that do not meet the requirements for a bona fide group of employers) does not constitute a single plan under the Employee Retirement Income Security Act of 1974 (“ERISA”). From a practical standpoint, this means that individual employer Form 5500s will have to be filed and individual plan audits will have to be performed for participating employers that have at least 100 eligible participants. There is considerable difference of opinion over the DOL’s position, but there are significant advantages of participating in a MEP even if individual Form 5500s and audits are required.


In addition to potentially only requiring a single Form 5500 and plan audit, there are significant advantages gained by participating in a MEP, including:

  • Elimination of primary fiduciary responsibility
  • Investment fiduciary protection-relief from responsibility for selecting and monitoring plan investments
  • Economies of scale in the form of buying power of a single large plan vs. smaller plans and greater negotiating power when buying investment and other plan services
  • Cost savings
  • Only a single plan document is maintained
  • Single source solution for plan services
  • Ease of use for small businesses
  • Elevated level of governance and attention to detail that employers of all sizes are unlikely to achieve without costly assistance

Who handles the administration of the plan?
MEPs deliver administrative ease for employers, as nearly all of the administrative tasks relating to the Adopting Employer’s participation can be shifted to the plan sponsor. With a single plan document that participating employers adopt on an individual basis, a multiple employer plan approach may in certain instances eliminate the need for individual plan audits and government filings, including individual Form 5500s.

What kinds of services would my company receive as an adopting employer in a MEP?
Typically, MEPs provide the adopting employer with a comprehensive package of plan services. These services often include plan design and document support, plan consulting, administration and recordkeeping, legal and technical support, regulatory compliance and government reporting, investment management, fiduciary protection, and sponsor and participant communications. Because administration is streamlined, participating employers can also realize significant economies of scale that may result in lower plan costs.

As an adopting employer in a MEP, what is your fiduciary role?
One of the key benefits of participating in a multiple employer plan is fiduciary relief-as the MEP sponsor assumes principal fiduciary responsibilities associated with sponsoring a retirement plan. The MEP sponsor also ensures that the plan remains in full compliance with IRS and DOL regulations, providing plan amendments and regulatory updates as needed. The level of ERISA fiduciary protection a MEP offers not only relieves plan sponsors of the due diligence and ongoing monitoring of plan investments, but can also protect advisors-acknowledging their role with their clients.

How are plan investments typically handled under a MEP?
Under a MEP, the sponsor often also serves as investment fiduciary. As the investment fiduciary, the MEP sponsor evaluates, identifies, selects and monitors plan investments, offering a fiduciary process that includes an investment policy statement, investment evaluation and selection,and ongoing monitoring and performance reporting. The ERISA section 3(38) investment fiduciary oversight and responsibility that the MEP sponsor assumes relieve advisors and their clients of potential liability associated with the burden of due diligence and ongoing monitoring of investments.

As an investment fiduciary, MEP sponsors offer the benefit of careful oversight of investment options for participants that are regularly scrutinized for appropriateness, provide rigorous style consistency and the opportunity for broad diversification and asset allocation-and the benefit of due diligence built around the fiduciary responsibility that the sponsor assumes to ensure that plan investments are appropriate for a qualified retirement program. A MEP provides a single Investment Policy Statement that covers all adopting companies. Fund monitoring is done on behalf of all adopters. Documentation of fiduciary decisions is critical due to increased scrutiny by adopters & regulators.

A MEP’s investment fund menu will generally be identical for all adopting employers. Investment menus should be broad enough to satisfy the investment needs of the employees of potential adopters and simple enough to be user-friendly to employee groups of widely varying investment sophistication.

Why else would my company want to become an adopting employer?
MEPs are an ideal retirement plan solution in many situations, particularly where fiduciary liability is an issue, when there is no current plan in place because of the complexities involved in offering one, for bona fide employer groups, where clients with multiple payrolls are looking for synergy, in decentralized organizations looking for leverage, and in organizations looking for value-added services for members or affiliates.

What should I take into consideration when evaluating options regarding a MEP?
While a multiple employer plan may be a good solution, it is important that employers and financial advisors, perform due diligence in selecting a MEP and its associated plan service providers.

The following are some of the factors you should consider when comparing multiple employer plans:

  • Are all service providers adequately experienced in fully serving MEPs? Multiple employer plans are unique and require specific knowledge and expertise. Ask how long the provider has been in the MEP industry, how many MEP clients they serve, how many total participants are in the MEP plans they serve, etc.
  • Is the MEP sponsor acting as a fiduciary? Ask for written explanations of their fiduciary role and specific fiduciary functions.
  • Are all service providers adequately insured?
  • Do all plan service providers undergo annual independent audits?
  • Do the MEP service providers have adequate protections and processes in place to manage a failure on the part of a single participating employer (i.e., failure to submit timely contributions, failure to make required contributions, etc.) and to ensure that such failure does not taint the MEP
  • Are the MEP fees fully disclosed by all service providers? Are all service providers in compliance with the new DOL fee disclosure regulations?
  • Does the MEP plan sponsor periodically review service provider fees and determine reasonableness?

Multiple employer plans are often an excellent solution to address retirement plan cost, fiduciary, and administrative issues. Any employers that are considering participating in a MEP should carefully assess whether a MEP is the type of retirement plan that best meets its needs and if so, which MEP can provide the employer with the services it deserves.

About the Author

Robert Alin

As our chief legal officer, Robert oversees Pentegra’s legal, compliance and governance areas, and leads a team devoted to regularly consulting with clients regarding ERISA issues, IRS, DOL and PBGC regulations and their impact on plan design and qualification, as well as plan compliance. With more than 35 years of experience in all facets of retirement benefits, Robert has been involved in every aspect of our business. His talents extend beyond that–he was also instrumental in procuring a change to Section 413(c) of the Internal Revenue Code and in obtaining a prohibited transaction exemption for Pentegra—which is no small feat—both of which have been integral to the growth of the business.


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