Therefore, a small plan that is consolidated into a larger Form 5500 filing may potentially subject itself to an expensive audit requirement when none existed before.
Department of Labor issues guidance to the contrary. Unfortunately, for plan sponsors looking to adopt a GoP, it appears that the audit exception for smaller MEPs described above will not apply, unless the U.S. However, unliked PEPs or MEPs, GoPs are not single plans, but rather a single Form 5500 filing. The plans must have the same trustee, administrator, fiduciaries, investments and plan year in order to be considered a GoP. Additionally, smaller MEPs (and PEPs), with fewer than 1,000 participants, are exempt from a potentially expensive audit requirement, as long as no one employer exceeds 100 participants.Ī GoP is another new type of plan established by the SECURE Act, in which employers (whether unrelated, related or part of the same controlled group) can file a single Form 5500 for multiple defined contribution plans. The "one bad apple" rule, where the compliance failures of one employer could disqualify the entire plan, was eliminated by the SECURE Act. While MEPs existed prior to the SECURE Act, they are now easier to establish. MEPs allow related businesses (e.g., plumbing companies) to band together in a manner similar to PEPs to participate in a single retirement plan.
Defined benefit plans, 403(b) plans, governmental 457(b) plans and multi-employer plans for collectively bargained employees are excluded from the new PEP provisions. Note that PEPs are limited to 401(k) plans.
Introduced under the SECURE Act, PEPs allow unrelated employers that meet certain requirements (such as having the same "pooled plan provider," typically a bundled recordkeeper or third-party administrator) to band together to participate in a single retirement plan, in order to take advantage of their collective purchasing power to obtain lower fees and better services. These plan structures allow employees of more than one, typically smaller employer to participate in a single retirement plan, with the goal of expanding retirement plan access for all individuals.īut small businesses shouldn't overlook the act's group of plans (GoPs) option, which lets employers file a single Form 5500 for multiple 401(k) plans that share the same design and administrator. The pooled employer plan (PEP) and multiple employer plan (MEP) provisions are some of the most-hyped elements of the Setting Every Community Up for Retirement Enhancement (SECURE) Act.
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