401(k) Specialist Issue 4 - 2016 - 31

401(k) SALES & STRATEGIES
3 Important
Advantages of
401(k) Multiple
Employer Plans
By Jim McCrory
SMALL BUSINESS OWNERS HAVE FOUND WAYS to outsource
many of their non-business related functions, including the benefits
they provide their employees. And now, thanks to innovative services
in the retirement planning industry and favorable treatment among
our nation's policy makers, they can outsource most of their retirement
plan responsibilities as well.
THE MULTIPLE EMPLOYER PLAN
A multiple employer plan (MEP) is a group of unrelated businesses
that combine their 401(k) plan assets together to leverage
the benefits of pricing, operational efficiencies and fiduciary
oversight. Small business owners, who have chosen to join a MEP,
often choose to join as an effective way to manage their 401(k)
responsibilities and risks, while experiencing favorable pricing
and administrative support that they would probably not otherwise
have access to or receive. MEPs are most commonly offered
as an extra benefit through Professional Employer Associations
(PEO) and closely affiliated professional associations. PEOs can
also help business owners increase their productivity by helping
them outsource a multitude of human resources tasks including
payroll, benefits, recruiting, training and development, and more.
Joining an MEP can also help increase investor confidence and
engagement, and ultimately lead to better retirement outcomes for
today's employees.
Here are three important advantages these plans can provide:
1. EFFICIENCY
Many business owners underestimate the time and effort it takes
to properly operate a 401(k) plan. It is also common for them not
to realize just how many associated administrative responsibilities
are simply not being done or completed properly. Joining a MEP
can make it easier for business owners to provide a 401(k) to their
employees, as the MEP assumes the role of plan sponsor and assumes
many of the most critical administrative tasks that currently
fall on business owners. While small business owners recognize
the importance of this benefit, few have the time and experience
necessary to focus on their 401(k) -- rather, they prefer to focus
on growing a successful
business. MEP participation
is an effective way to
outsource most of these
401(k) responsibilities.
2. FIDUCIARY SUPPORT
Today's regulatory
climate has made many
companies hesitant to
assume any more risk
than necessary. In fact,
many business owners are
looking to reduce their risk.
Participation in a MEP is
an excellent option to help
business owners mitigate
their risks in the marketplace
and within their
business. With a MEP, the
PEO or association takes over a fiduciary role as the plan sponsor,
which helps reduce the business owner's fiduciary liabilities while
also relieving them of many of the administrative responsibilities.
MEPs can serve as a perfect home for advisors' small business
plans as these organizations drastically reduce risk and seek to
minimize fiduciary concerns.
3. COST
Compared with the potential costs of sponsoring a retirement
plan on their own in the open market, participating employers
in a MEP often realize competitive or lower investment, time and
opportunity costs. Be aware, some MEP costs are the same for
every plan, while other MEPs are structured to reward individual
plan growth. For plans expecting to grow, the second option may
be preferred.
WHAT'S NEXT?
Members of PEOs and associations will continue to enjoy the
benefits of the MEP. Providers and legislators are opening doors
and innovating in this space. In the near future, full " Open MEPs "
may become an option for business owners who are not part of an
association or a member of a PEO.
This is a tremendous growth area in the retirement planning
space, and advisors should consider and discuss this innovative
option when working with associations and small business owners.
Offering access to a retirement plan through a MEP provides small
business owners with a turnkey benefit, allowing them to spend
more time focusing on what they do best: their core business.
Jim McCrory is director of PEO/MEP Retirement Plan Sales for Lincoln Financial
Distributors.
ISSUE 4 2016 | 401kSpecialistmag.com 31
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401(k) Specialist Issue 4 - 2016

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