August 16, 2019

PLANSPONSOR just reported on: The Department of Labor (DOL) has issued a final rule to help more employers offer retirement savings benefits through ‘Association Retirement Plans’ (ARPs).

The rule, which will go into effect on September 30, will permit employers to connect with associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide to provide retirement plans for their employees. The DOL says the rule will allow small and midsized plan sponsors to offer competitive benefits packages similar to those of larger organizations, a resource usually unattainable for smaller businesses due to high costs and overwhelming paperwork.

“Less than a year ago, President Donald J. Trump signed an Executive Order focused on expanding quality, affordable workplace retirement plan options for America’s small businesses and their employees,” said Acting Secretary of Labor Patrick Pizzella. “Many small businesses would like to offer retirement benefits to their employees but are discouraged by the cost and complexity of running their own plans. Association Retirement Plans offer valuable retirement security to small businesses’ employees through their retirement years.”

According to the DOL under the rule, retirement plans may also be sponsored through professional employer organizations (PEOs), third-party human resources providers offering services to small and midsized plan sponsors. The DOL adds that the rule creates a safe harbor for PEOs, which offers clarity in administering retirement plans and in their role as PEOs. This includes “recruiting, hiring and firing workers of its client-employers that adopt the MEP [multiple employer plan],” and assuming “responsibility for and has substantial control over the functions and activities of any employee benefits which the service contract may require the PEO to provide”.

With ARPs, businesses can join retirement plans without sorting through the filing and administration burdens, as the association handles this on behalf of small plans.

First State Trust Company is a directed trustee, custodian and paying agent for both traditional Defined Benefit Plans as well as Multiple Employer Plans. For more information, please feel free to contact us.

David Draper, Chief Operating Officer

The posts expressed are views of FSTC and are not intended as advice or recommendations. For informational purposes only.

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