The US Department of Labor on Monday published a proposal for a new regulation governing multi-employer 401(k) plans. The proposed new rule would make it easier for small businesses to offer retirement plans to their employees by broadening the criteria under which organizations can form multi-employer plans, Employee Benefit News explains:
The arrangements are currently allowed for employers with an affiliation or connection, such as companies with a common owner or members of the same industry trade association. Under the proposed rule, MEPs could be formed by associations of employers in a city, county, state or a multistate metropolitan area, or in a particular industry nationwide, according to the DOL.
Sole proprietors, as well as their families, would be also permitted to join such plans, the DOL said. Professional employer organizations, which are human resources companies that contractually assume certain employment responsibilities for its client employers, could also sponsor plans.
The proposal comes in response to an executive order President Donald Trump signed at the end of the summer, directing his administration to remove barriers to small businesses offering retirement benefits through the multi-employer plans. Employees of smaller organizations are less likely than those at large firms to be offered employer-sponsored retirement plans.
The Trump administration has opted to pursue multi-employer plans as a solution to this disparity, in contrast to former President Barack Obama’s administration, which sought to encourage low-income Americans without access to employer-sponsored plans to save through government-sponsored plans called “myRAs,” which invested in the government securities investment fund and promised no risk of losing money. The Trump administration shut down the myRA program last year, citing low participation rates. The Obama administration had also encouraged state-level “auto-IRA” laws, which require employers to either provide a retirement plan for their employees or connect them to a portable, state-run option. The Republican-controlled Congress rescinded that policy last year.
The Labor Department under Secretary Alexander Acosta has also indicated a preference for an employer-centered approach to providing health insurance to a greater number of US workers. Earlier this year, the department finalized a new regulation that will enable more small businesses and self-employed Americans to buy health insurance through association health plans (AHPs), which proponents say will help lower health insurance costs for smaller employers, but which critics say undercuts the essential coverage requirements created by the Affordable Care Act.