Employers Wait for Legislative Action to Open Portable Benefits

Employers are eager to offer portable retirement plans to independent contractors--so long as they first get the go-ahead from Congress.

Legislators for years have proposed opening up a retirement benefit known as multiple employer plans, or MEPs, to more people who don’t have access to a 401(k) or other retirement savings plan, including gig workers and self-employed individuals. Some of the proposals have even had bipartisan support. All of the bills, however, failed to gain traction.

“We have a lot of companies that are poised to provide multiple employer plans,” Lynn Dudley, senior vice president of retirement and compensation policy for employer advocate the American Benefits Council, told lawmakers at a Senate hearing last week.

Now, a provision to open MEPs is included in the Retirement Enhancement and Savings Act, a sweeping bipartisan piece of retirement legislation that gained momentum when it was introduced in March but has been stalled in committees.

Finance Committee Chairman Orrin G. Hatch (R-Utah) and ranking member Ron Wyden (D-Ore.) sponsored the Senate version of the bill (S. 2526), and Rep. Mike Kelly (R-Pa.) introduced its sister in the House (H.R. 5282).

“MEPs are something that have been around for many years, but they’ve been a little limited because of the rules,” Dudley told Bloomberg Law Aug. 27. ABC has been a longtime advocate for opening MEPs up to a wider variety of employers.

Private Sector Left Out

Private-sector employers can create a MEP if they have a common interest, or nexus, and are held liable for claims brought against other employers in the plan. A MEP doesn’t qualify as a single employer plan under federal employee benefits law, or the Employee Retirement Income Security Act, according to Labor Department rules.

President Barack Obama’s DOL in November 2015 relaxed the nexus requirement of state-backed MEPs but didn’t extend the same ability to private-sector employers.

At least eight bills from Democrats and Republicans between 2013 and 2018 included provisions for MEPs.

The fact that open MEPs legislation hasn’t passed isn’t because it’s bad policy, Beth Dickstein, an employee benefits lawyer with Sidley Austin LLP in Chicago, told Bloomberg Law.

“I’d blame it on the political process more than anything fundamentally wrong with the legislation,” Dickstein said.

The most recent proposal in RESA would open up pooled employer plans to unrelated businesses as long as they’re operated by a provider acting as the plan’s fiduciary, among other requirements.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) told Bloomberg Law in July that he would include parts from RESA in his Tax Reform 2.0 legislation. It’s unclear what those parts will be.

“Chairman Hatch is committed to continuing to work with Chairman Brady and bipartisan members of both the House and Senate to find a path forward for RESA,” Nicole Hager, a Senate Fiance Committee spokeswoman, told Bloomberg Law in an email Aug. 27.

Another bipartisan bill introduced by Sen. Tom Cotton (R-Ark.) and co-sponsored by Sens. Heidi Heitkamp (D-N.D.), Cory Booker (D-N.J.), and Todd Young (R-Ind.) would expand on the MEPs provisions in RESA.

The Small Business Employees Retirement Enhancement Act (S.3219), which was part of a pack of bills the four senators released in July, would transfer some of the risk of managing the plan to the pooled plan provider to give employers more incentive to join them, Caroline Tabler, a spokeswoman for Cotton, told Bloomberg Law in an email July 27.

Health Rule Precursor

The push to open MEPs is reminiscent of the DOL’s recent expansion of association health plans, which allowed unrelated employers to band together and provide health care as a large group.

The June rule sped through the regulatory process in eight months after President Donald Trump asked the DOL to look into expanding the plans in an October 2017 executive order.

“To me, that’s a signal that the next step will be the multiple employer plans,” Dickstein said.

Dudley wasn’t so sure.

“I don’t think association health plans have anything to do with” MEPs, Dudley said. “I think the only reason MEPs have taken long is that a number of things are trying to be done.”