Multiple-Employer 401(k) Retirement Plan Page 2

What Are the Benefits of Adopting an MEP?
There are many benefits for your business to adopt a Multiple Employer Plan.

Fiduciary Risk Mitigation
1. MEP serves as the Plan Administrator. The Plan Administrator has discretionary authority over the day to day duties and aspects of a qualified plan.

2. MEP is the named fiduciary. This role has the discretion over the disposition of plan assets, plan operations, appointment of other fiduciaries and hiring/firing of service providers.

Substantial cost savings compared to operating a single employer plan compared to an MEP.
1. Under the MEP Plan there are no installation fees
2. There are no annual fees or incidental costs to the employer.
3. Audit included for all plans with over 100 eligible employees or 100 participants.

Audit Costs:
Large employers with single employer plans, in particular, will benefit from this cost savings. The law requires that 401(k) retirement plans with more than 100 participants be audited annually. An independent, qualified public accountant must conduct an audit of the plan’s financial statements, including review of the plan’s Form 5500, schedules, internal control practices, and other information. This audit alone can potentially cost more than $5,000.00 each and every year.

One of the most compelling benefits your business will realize by adopting an MEP is the cost savings. Let’s take a look at the savings when comparing the hard costs your business may have when operating a single employer plan on your own outside of an MEP. 

Eliminate Document Preparation Costs:
When a business offers certain single employer retirement plans such as a cross tested or new comparability plan, plan documents must be professionally drafted. For an individually drafted retirement plan, outside of an MEP, your business must pay to have the plan drafted, then as laws and regulations change over the years, modifications to the original plan must be made by restating the plan documents. This maintenance can be quite expensive over time.

Important Note for your Business: Document preparation costs are significantly reduced for an adopting employer and document preparation is provided under the MEP.

Eliminate Compliance Testing Costs:
Most non-safe harbor 401(k) retirement plans must pass rigorous nondiscrimination tests annually to ensure that the plans are not discriminatory, and continue to qualify for tax advantaged status. Under a single employer plan, a plan sponsor must pay a recordkeeper or a third party administrator (TPA) to handle this ongoing testing work. These costs can potentially be several thousand dollars per year.

Important Note for your Business:

Under the Multiple Employer Plan approach, testing is included for each Adopting Employer and economies of scale are realized during testing processing. Nondiscrimination testing is streamlined at no additional charge to the employer.

Eliminate Form 5500 Filing Costs:
Each year, pension and welfare benefit plans are required to file an annual report regarding their financial condition, investments, and operations. This annual reporting requirement is generally satisfied by filing the Form 5500. For a single employer plan, outside of an MEP, your business will need to pay to handle this filing. These costs can potentially be several hundred dollars or more per year for a plan sponsor.

How can you reduce your Fiduciary Responsibilities?
Reduce Fiduciary Responsibilities

What does the term fiduciary responsibility mean?
It can best be thought of as “acting in the best interest of the employee” or as a trustee. In this role, imposed by law, the business owner has voluntarily agreed to act as the trustee for his or her employees in regards to their rights, benefits, and retirement plan assets.

The fiduciary has a legal obligation to carry out its plan responsibilities with the highest degree of prudence, good faith, honesty, integrity, service, and undivided loyalty to the beneficiaries’ interest. In this example, the retirement plan participants. This good faith has been interpreted to impose an obligation to act reasonably in order to avoid negligent handling of the plan participants’ interest, as well as the duty to not favor anyone’s interest (including the trustees own interest) over the plan participants.

This is the area where the MEP is significantly different from single employer plans. In adopting MEP Plan the adopting employer will receive fiduciary support in the area of selecting and monitoring the plan’s investment which is managed by sponsor of the plan.

Participant Education Support
By joining an MEP, you will also have access to an arsenal of award-winning3 tools and resources to enroll and educate your employees and participants.

Examples of these include:
Pre-Enrollment Materials such as:

• Educational payroll stuffers
• Enrollment workshop posters
• Educational posters

Enrollment Tools such as:
• Enrollment kits3
• Enrollment workshops
• Enrollment videos
• Enrollment workshop conference calls
• Online enrollment workshops
• Online enrollment

Investment Education & Planning Tools are available such as:
• Employee educational seminars
• Participant Web site3
• Retirement Planning Assessments
• Investment Fact Sheets
• Participant newsletters
• E-Tips and more

Many more tools are at your disposal, and several are available in both English and Spanish.

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