Posted on October 30, 2019

Comment Letter from IRI

WASHINGTON, D.C. – The federal government should do more to help small businesses provide workplace retirement plans to employees, according to the Insured Retirement Institute (IRI). The group filed comments with the U.S. Department of Labor (DOL) this week saying that existing regulations are a hindrance to small businesses owners’ ability to offer workers a retirement plan.

DOL is considering “whether to amend its existing regulations to facilitate the sponsorship of ‘open Multiple Employer Plans (MEP) by persons acting indirectly in the interests of unrelated employers whose employees would receive benefits under such arrangements.” 

MEPs enable small businesses to participate in professionally administered plans through which they can benefit from economies of scale with limited fiduciary responsibilities, providing their employees with access to the workplace retirement plans they need to prepare for financial security in retirement.

“Tens of millions of Americans do not have access to a retirement plan at work, leaving many ill-prepared to meet their financial needs after they stop working,” said Jason Berkowitz, IRI chief legal and regulatory affairs officer. “This gap is most acute among employees of small businesses, many of whom do not sponsor plans due to concerns about costs, complexity, and fiduciary liability. As a result, IRI strongly supports action to expand workers’ access to retirement plans.”

Under current law, a group or association of employers may only sponsor a MEP if, among other things, the employers “share some commonality and genuine organizational relationship unrelated to the provision of benefits.” This commonality requirement has proven to be a substantial barrier for small employers who are reluctant to take on the complex legal, financial, and administrative risks and challenges inherent in sponsoring their own retirement savings plans.

IRI has long supported federal legislation that would remove this significant barrier to broader utilization of MEPs, such as the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”).

IRI also said that financial services companies such as banks, insurance companies and broker-dealer and asset management firms can offer high quality, low cost MEPs that could serve the vast number of small employers that do not currently offer retirement plans for their employees.

“Allowing a financial services firm to sponsor an Open MEP could provide significant benefits to employers and their employees,” Berkowitz said. “By their nature, financial services firms would bring far more direct expertise in financial matters to this role than other types of entities.”

Moreover, many employers already have existing relationships with financial services firms, thereby providing an existing pathway for information about MEPs to flow to small businesses and their employees about opportunities to join MEPs.

If banks, insurers, broker-dealers, and asset managers are permitted to sponsor MEPs, they could leverage those existing relationships to improve financial literacy and encourage more Americans to save for retirement.

“A cost-effective, easy-to-use workplace retirement savings program is an important tool for building retirement security,” Berkowitz said. “Reducing the number of workers without access to a workplace plan should be a top priority for the Department. Revamping the rules and regulations to allow for MEPs to meet the needs and concerns of small employers would help to close the retirement coverage gap and improve the retirement outlook for millions of working Americans.”

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