The U.S. Department of Labor (DOL) finalized a ruling that will improve retirement security for small and mid-sized employers as it estimates that 38 million private sector employees do not have access to retirement benefits. The ruling was issued on July 29, 2019 and was effective September 30, 2019. The ruling is as a result of an executive order issued by President Trump in October 2018 that focused on retirement plan security for small and mid-sized employers. The DOL used its delegated authority under ERISA to create this ruling. The ruling from the DOL is specific to defined contribution plans and did not include defined benefit plans.Association Retirement Plans

The DOL ruling states that small and mid-sized employers can now offer retirement savings plans through Association Retirement Plans (ARPs), otherwise known as Multiple Employer Plans (MEPs). These plans allow employers to come together to offer retirement plans to their employees. For this purpose, the association can be in a certain geography (i.e., split by city, state, or multi-state metropolitan area) or in a common industry with-out regard to geography. The DOL ruling also provides a safe harbor for a Professional Employer Organization (PEO) to offer an ARP.

An ARP is considered a single ERISA plan and therefore ERISA requirements (such as reporting, disclosure, plan documents, and investment monitoring) do not apply to each participating employer separately as the ERISA requirements instead apply to the ARP. The participating employers, however, would still have a fiduciary duty to ensure the plan is operating appropriately.

Key Reasons to Consider an ARP or MEP

Organizations that would like to offer traditional 401(k) retirement plans to help retain and attract new talent, may want to consider these types of programs as they will be more cost effective and will require far less internal resources than a traditional individual employer plan. Importantly, ARPs can provide substantial fiduciary support and improved level of governance, including investment management and oversight services. Outsourcing plan administration and investment fiduciary services will provide for better overall plan management and much lower risk for each adopting employer versus setting up individual employer plans.

In addition, there could be access to lower cost investment options that would be available in the ARP due to larger purchasing power versus an individual small employer plan. While there is a single plan document, each adopting employer still has the flexibility to design key provisions of the benefit program that would work for them. Examples include plan eligibility, contribution levels, and vesting provisions.

Association Retirement Plans versus Association Health Plans

A similar ruling was passed for Association Health Plans (AHPs) in 2018. However, in March 2019, a federal district court found that the ruling violated ERISA. This case developed after push back by several states and the District of Columbia of the AHP ruling. It is possible that the federal dis-trict court’s decision could be overturned in the appeals process. AHPs have had very different outcomes versus ARPs, given involvement from the states for AHPs. ARPs are federally regulated and therefore consistent in all areas.


Retirement income security continues to be an important topic for employers and employees. The DOL ruling provides additional opportunities for small and mid-sized employers to offer defined contribution retirement benefits to their employees in this competitive employment landscape. We expect more of these employers to focus on retirement benefits as they assess their over-all benefits package for recruiting and retention purposes.

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