A multiple employer plan is a plan preserved by three or more employers who are not related. These frequent questions and answers provide general results and should not be cited as legal authority.
Multiple Employer Plan vs. Multiemployer Plan
When someone chooses an employee benefit, employers need to consider what kind of retirement plan they will offer. Based on the company’s structure, employers can choose between different types of projects, including a multiple employer plan or a multiemployer plan. Both of these plans have distinct effects that employers should consider when making their solution.
What Is a Multiple Employer Benefit Plan?
Multiple Employer Plans (MEP) are retirement plans that are used by many employers. These employers must not be related under IRC controlled groups, IRC trades or businesses under common control), or IRC affiliated service groups. These employers must follow the rules outlined in IRC. Under an MEP, employees of different sector companies can join a single tax-qualified retirement plan. A group of employers or a Professional Employer Organization (PEO) sponsors all of these plans.
There are two various types of MEPs. Closed and open. A closed MEP gets sponsorship from a bona fide group. A bona fide group is very open to organizations that share an interest. An available MEP does not recognize a bona fide group, meaning employers sometimes can’t take the total savings or reduced management profit.
The Advantages of a Multiple Employer Plan
Any MEP can be profitable to both employers and their employees. Employers can use multiple employers to work together and combine their capital, saving these employers wealth. MEPs make it easy for small businesses to offer their employees low-cost investments typically provided by large companies only. The lower fees for investments also help companies avoid lawsuits to allow plan partners to pay a lot more investment fees. Avoiding lawsuits is another way small industry can lower their operating costs. Another advantage of MEPs is that they reduce an individual employer’s fiduciary risks and responsibilities because the plan sponsor tends to be in charge of administrative and fiduciary roles.
This is good for those who previously wouldn’t consider working for a small business due to the lack of profit.
The Difference Between Multiple Employer Plan vs. a Multiemployer Plan
Even though multiple employer plans and multiemployer plans sound quite similar, there are some critical differences between these two kinds of projects that concern various people. A multiple employer plan is a pension plan that multiple employers keep. More than one employer maintains this plan because, through a joint effort, they can lower administrative expenses and pool their plan’s assets. This type of project is also profitable for investing purposes.
A multiemployer plan uses collective bargaining. Similar to a Multiple Employer Plan, multiple employers control it. These employers tend to perform more work in similar industries and labor unions. Some groups refer to multiemployer plans as “Taft-Hartley” plans. They must adhere to the qualification rules under IRC
Employees who work in unionized fields can benefit from multiemployer plans. If they want to work for a different employer within their industry, they may continue the retirement plan they had with their previous employer. Employees who work for construction, trucking, or chain grocery store companies benefit from multiemployer plans.
Experience a gap in their coverage. Employers that have a union workforce also benefit because they aren’t solely taking on all the risk.
Both multiple employer plans and multiemployer plans come with many advantages for businesses and employees alike, and Human Interest can help you determine which is right for your team. Knowing the differences between the two can help you make an informed decision about the type of plan you want to offer.