It’s Time for 401(k) Plans to Become Part of the Sharing Economy

Information may not be reliable

Anyone who works with small 401(k) plan sponsors knows that they have none of the time, patience, skills or desire to be plan administrators or ERISA fiduciaries. Regardless of this, the law tasks them, whether they ignore them or not, with significant responsibilities and creates financial risks for them.

Over the last few years there have been those of us in the industry who have advocated for a better way – one that eliminates the fiduciary dysfunction we currently see in the small employer market. The better way is through the aggregation of the plans of unrelated 401(k) plan sponsors into single plans called multiple employer plans.                                                   

(Multiple employer plans are distinct and different from multiemployer plans that are created for union members under collective bargaining agreements. I am focused on multiple employer plans in this piece.)

Terry Power of The Platinum 401(k) and Pete Swisher of Pentegra are huge and continue to be effective advocates of this highly beneficial way of providing 401(k) plan benefits.

This better way has the following objectives:

• Reduce the employer’s exposure to fiduciary liability as much as possible
• Put plan administration burdens entirely on a professional administrator with benefit plan expertise
• Keep the expenses of the arrangements at economical levels through the aggregation of the plans of unrelated employers.

You might call this better way the sharing economy or the “Uberification” of 401(k) plans.

We were almost there five years ago. But the then the U.S. Department of Labor decided, in two advisory opinion letters issued in 2012, that so-called open multiple employer plans (plans with participating employers who are related to each other only because they participate in the plan) had to be treated as separate, single employer plans under DOL rules. Under DOL rules annual reporting, audit, and bonding purposes is done on a separate employer-by-employer basis even though the employers are on the same administrative platform. The air went out of the balloon for open multiple employer plan arrangements in that year. Read More...

About The Author:

Contact me at tpower@ThePlatinum401k.com or at 813.774.3366 for more information about Pooled Plan Provider. We've worked with multiple employer plan clients for over 25 years and are the industry leader in this niche field. We work with advisers and clients all over the country to reduce cost and employer liability.  There's more information available on our website at www.ThePlatinum401k.com.