Historically, MEP retirement plans have been adopted by employers with some common association, such as members of a trade association or co-op. Recently, a new type of MEP is being promoted by several organizations. This type of MEP is known as an "open MEP" because it is adopted by employers who are not related for income tax purposes and have no other relationship other than being adopting employers of the MEP retirement plan. The plans are promoted as a cost-saving alternative, which also allows the employer to avoid ERISA fiduciary responsibilities. In reality, the MEP may or may not save money, and the employer's fiduciary liability and responsibilities cannot be eliminated.
There is a conflict between the guidance by the IRS and Department of Labor as to multiple employer plans. There are also many open questions with respect to MEPs on which there has been no legally binding guidance. Some of the MEPS being promoted may not be legal, which puts the adopting employers at jeopardy for a variety of sanctions. This paper discusses the MEP requirements generally and the "open MEP" in particular. Among other things, it contains a list of due diligence questions in the employer considering an "open MEP" should ask. It also discusses the risk that an adopting employer undertakes when it becomes a participant in an "open MEP."
Overland Park, Kansas