Exit Strategies for MEP s

Transcription

1 Terrance Power, CFP, ERPA, AIFA, QPA President, The Platinum 401k, Inc. Terrance Power, CFP, ERPA, AIFA, QPA President, The Platinum 401k, Inc. Terrance Power has been in the Retirement Plan industry since 1981, and has been involved in the installation and operation of corporate retirement plans for more than 3,000 clients during his career. Terry is committed to the highest standards of fiduciary disclosure and operational excellence. He is also one of the most well-credentialed and well-respected individuals in the qualified plan industry today. Terry has spoken before many industry groups and has met with or provided testimony to senior officials at the United States Department of Labor and the U.S. Government Accountability Office on the subject of Multiple Employer Plans. 1

2 We re going to be discussing the various issues around clients and prospects who are current adopters in a 413(c) multiple employer plan (MEP). There is a lot happening in this area, and we ll be able to touch on changes coming out of Washington that impact these types of programs, and also what they may mean for you and your business going forward. We ll also have plenty of time for questions and answers as we move through the slides. So let s go. This session probably could also be named. Ok, now how do I get my client out of this thing?.but first, a little background on how we got here in the first place. 2

3 413(c) Multiple Employer Plans Defined contribution plans maintained by unrelated employers. These are employers who lack sufficient ownership to be part of a control group under a single plan document. Not to be confused with Multiple Employer Pension Plans, which are defined benefit plans that continue to receive very bad press for very good reasons. There are open MEP s and Closed MEP s. Multiple Employer Plans have been around for decades. We saw a dramatic increase in their use with the issuance of Rev. Proc , which required PEO s to use MEP s as the approved retirement plan program for their client organizations. By 2011, we began to see the emergence of a unique type of MEP the open MEP. Sales took off. Fast forward to May 25,

4 U.S. Department of Labor issues Advisory Option (A). Reporting requirements of MEP adopters change. Individual Form 5500 s, audits again required. Adopting employers are treated as a plan sponsor by the DOL. Common misconceptions about MEP s MEPs are illegal. Open MEPs went away after the 2012 DOL Advisory Opinion. What about the one bad apple issue? All MEPs are the same. MEPs can be properly structured to save clients time, money, and dramatically reduce liability. 4

5 So..back to our session topic.exiting a MEP As an adopter, the client cannot terminate a MEP. It s not their plan. A participant must still have a distributable event as outlined in the plan document in order to liquidate their MEP account. Adopters must establish a successor plan, execute a plan-toplan transfer, then they may, if they wish, terminate that spinoff plan. We recommend that they consult with an attorney. Restrictions on Exiting a MEP As always, the devil is in the details. Most MEPs offer an easy transition process to leave. It can be as simple as any plan-to-plan transfer. However, as with investment providers, some MEPs can be difficult to make a clean break with. What did the adopting employer agree to at adoption? What does the MEP plan document say? 5

6 MEP plan sponsor should provide the adopting employer with a de-adoption package to execute a spin-off to a successor plan. The adopting employer and MEP plan sponsor will sign off on this. De-adoption package typically includes a sample adopter corporate resolution to de-adopt, de-adoption plan paperwork, representation of qualified status of the successor plan, and a few other items. Don t forget any partial year filings that might be required. The MEP service providers aren t engaged to do any work for the new plan. Plan testing will need to incorporate all activity in both plans for the transition year. Responsibility is on the former adopting employer to insure that their new plan properly handles the aggregation of the two plans for compliance purposes. If the adopter was operating under a Safe Harbor election to eliminate ADP testing, they should make sure that they are able to maintain the election for the full plan year. Consult with an ERISA attorney. 6

7 What s coming next for MEPs? State-Run MEPs for private sector employers.or not? RESA 2017 Retirement Enhancement Security Act. Establishes Pooled Employer Plans (PEPs) run by Pooled Plan Providers (P3) beginning in MEP to PEP conversions could begin 1/1/20. Your clients will be hearing the PEP Talk from your competitors. Where will these changes leave you and your firm? Summary and Conclusions Assisting a client in departing from a MEP usually is no more difficult than any other plan-to-plan transfer. MEP s and their successor, the PEP appear to be headed for a permanent place in our industry. Whether you love them or hate them, they re the reality that all of us need to understand. They re not going away. 7

8 Questions? Thank you for your participation! Terrance Power President, The Platinum 401k, Inc Terrance Power, CFP, ERPA, AIFA, QPA President, The Platinum 401k, Inc. 8

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