From Health to Retirement: Small Businesses Get Boost From Trump

Association health plans, meet association retirement plans. They’re two ways President Donald Trump is looking to give small businesses more access to employee benefits similar to those at large corporations.

Trump asked the Labor Department in an executive order to look into loosening restrictions on small businesses that want to band together to offer retirement savings plans to their employees.

The executive order, signed by the president Aug. 31 in Charlotte, N.C., comes a day before the DOL’s regulation expanding access to a small business health insurance option, known as association health plans, is effective. That regulation came in response to another executive order signed by Trump in October 2017.

“This is a positive one-two punch on behalf of the industry,” International Franchise Association President and CEO Robert Cresanti told Bloomberg Law in reference to the two presidential actions. Cresanti attended the event in Charlotte.

“Association retirement plans,” as Trump called them in a speech before signing the order, would be a type of 401(k) plan for employees of small businesses that choose to pool their resources to provide them. The plans would also follow workers from job to job, encouraging more Americans to save for retirement.

Possibility of Portability

Secretary of Labor Alexander Acosta, who also addressed the crowd in Charlotte, lauded the possibility of a portable retirement benefit for employees.

The order directs the DOL to examine relaxing the requirement that small business have a common interest to form what’s commonly known as a multiple employer plan, or MEP. The order also makes a request that the Treasury Department explore lowering minimum required distributions for 401(k)s or individual retirement accounts so retirees can continue saving for a longer period of time.

Expanding access to multiple employer retirement plans is less controversial than the association health plan rule, which currently faces a lawsuit by 12 state attorneys general. The lawsuit alleges the DOL violated federal rulemaking law when it released the association health plan rule in June.

Micheal Kreps, a principal with Groom Law Group, told Bloomberg Law he expects the regulatory process on a potential rule from the DOL to be smooth considering the issue has been around for “at least a decade” and there’s generally been a “broad consensus around the issue.”

Legislative and Regulatory Fixes

A similar provision to MEPs formed by businesses that don’t have a common interest—or “open MEPs"—is currently in a piece of sweeping bipartisan retirement legislation, the Retirement Enhancement and Savings Act, which initially gained attraction but has since stalled in committee.

Finance Committee Chairman Orrin G. Hatch (R-Utah), who’s a co-sponsor of RESA, welcomed the executive order, but he said passing the bill is still a priority.

“The bipartisan bill goes a step further and makes a number of legislative fixes that can’t be made on the regulatory side,” Nicole Hager, a spokeswoman for Hatch, told Bloomberg Law in an email Aug. 31.

Finance Commitee ranking member Ron Wyden (D-Ore.) is the other sponsor of the Senate version of RESA (S. 2526). Rep. Mike Kelly (R-Pa.) introduced its sister in the House (H.R. 5282).

Recalling the State Rollback

Despite the general consensus on open MEPs being a way to expand retirement savings options for small business, Congress earlier this year rolled back an Obama-era rule that created a “safe harbor” for states wanting to create a voluntary retirement plan for workers who don’t have a savings option offered through their employer.

There’s “irony” in the administration “taking credit for expanding efforts to retirement security when they shut that down when it came to states and cities,” Patricia Smith, a former solicitor of labor in the Obama administration and senior counsel at the National Employment Law Project, told Bloomberg Law.

The U.S. Chamber of Commerce, TIAA, and Job Creators Network were among groups that immediately announced their support of the new executive order.