How Do Group Plans Differ From Standalone Or Single-employer Plans?
Group plans involve multiple employers combining resources to hire an administrator to run the plan, which reduces fiduciary exposure and costs compared to single-employer plans. In a group, employers share expenses and enjoy reduced fiduciary liability, making it a more cost-effective option. Unlike single-employer plans, where participating employers must be related, group plans allow unrelated employers to join and benefit from reduced costs.
What Are The Pros And Cons Of Sponsoring Retirement Benefits Via A MEP Or DCG?
The main advantage of sponsoring retirement benefits via a MEP or DCG is the reduction in expenses. By sharing costs with multiple employers, expenses like 5500 reporting and investment advisory fees become more manageable. However, a significant downside is the lack of flexibility, as employers must adhere to a fixed set of service providers and plan benefits, reducing customization options. Additionally, transitioning from a single-employer plan to a group plan can require effort and expense.
Which Employers Are A Good Fit For Group Retirement Arrangements?
Group retirement arrangements are particularly beneficial for small employers, who likely have limited budgets for employee benefits operations. Furthermore, companies without in-house HR departments can rely on the expertise of group plan administrators to handle many compliance tasks.
What Is A Multiple Employer Plan (MEP) And A Defined Contribution Group (DCG)?
A multiple employer plan (MEP), a form that’s been available for decades, allows smaller employers to band together and achieve cost efficiencies by using a fixed group of service providers. An open MEP contains employers who may have nothing in common other than participation in the plan, while a closed MEP requires the participating employers to have a common nexus other than mere plan participation. Open MEPs are not as cost-effective as a closed MEP, and are more heavily regulated. A defined contribution group (DCG), introduced through the SECURE Act 2.0, offers similar efficiencies to a MEP, but does not require a connection among employers, providing more flexibility and potentially replacing MEPs over time.
How Does A Pooled Employer Plan (PEP) Differ From MEPS And DCGs?
A pooled employer plan (PEP) further reduces employer liability by legally transferring most fiduciary responsibilities to the Pooled Plan Provider (PPP). Introduced under the SECURE Act, PEPs offer reduced fiduciary liability for employers, with the PPP hiring investment advisors, handling audits, and signing the 5500. This legal reduction in liability makes PEPs a compelling choice for employers seeking to minimize their involvement. However, the participating employer remains liable for their choice of PEP, and must monitor the PPP to ensure compliance.
What Are Some Common Issues After Joining A Group Plan?
A common mistake employers make after joining a group plan is assuming they no longer have any operational responsibilities. Employers must remain vigilant, ensuring that their service providers fulfill their duties, such as filing Form 5500s timely. Employers are also responsible for tasks like payroll management of plan contributions, especially if the plan includes salary deferrals. Even with strong support from plan providers, employers must stay engaged and ensure compliance with plan provisions.