Broad Support For Multiple-Employer Plans

Support for Multiple-Employer Plans to boost retirement savings grew Thursday with Republican Sen. Orrin Hatch, R-Utah, hailing the bipartisan idea.

“Clearly, there is a lot of momentum for this proposal, which, in my view, is a good thing,” Hatch said at the start of a Senate Finance Committee hearing. “Indeed, this is an idea whose time has come.”

The committee met to discuss retirement policy suggestions made by a tax reform working group on savings and investment policy, convened last year at the behest of Hatch, its chairman. Members debated a host of proposals aimed at addressing the looming retirement crisis.

Several of those proposals mirror those put forth by the White House as part of the president’s budget due Feb. 9. Those ideas include auto-enrollment of workers into 401(k) plans, expanding access to part-time workers, and allowing for Multiple-Employer Plans (MEPs).

According to the National Institute on Retirement Security, U.S. retirement savings are dangerously low, with Americans facing a savings deficit of between $6.8 and $14 trillion.

The MEP proposal would permit small businesses from different fields to join together and offer a retirement plan. Current rules only permit businesses from like fields, such as two law firms, to offer multi-employer plans.

The change will help employers by allowing them to share the administrative costs, the White House said. As an added benefit, if an employee moves between employers participating in the same MEP, or is an independent contractor participating in a pooled plan using the open MEP structure, he can continue contributing to the same plan even if he starts work for a different company.

However, Carolyn Johnson, president of annuities and tax-exempt markets for Voya Financial, told InsuranceNewsNet that there’s been no discussion of a “bad apple rule” with the MEP proposal.

Because a MEP is a single plan, if one of the adopting employers violates some qualification requirements, like the coverage rules, that would technically disqualify the entire plan. Recent MEP proposals have included language requiring the Treasury Department to remove the "one bad apple" threat through regulations.

“It’s just a high-risk element and I think that is something … that really needs to be addressed,” said Johnson, who added that Voya favors the MEP concept otherwise.

Johnson did not speak at the hearing.

John Kalamarides, head of institutional investment solutions at Prudential Financial, testified strongly in favor of MEPs. He noted that more than 5.5 million U.S. businesses employ less than 100 workers, and half of those businesses don’t offer retirement plans.

Cost is the number one reason small businesses don’t offer retirement plans, said Kalamarides, citing a 2015 Prudential survey of 850 small employers.

“A federal solution, in our view, is an imperative,” Kalamarides said. “MEPs offer such a solution for employers considering retirement savings options and will complement state based solutions.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.