Multiple Employer 401(k) Document

[Guest Green92]

Are multiple employer 401(k) plan documents usually drawn up by an attorney? Are there prototypes avialable (probably not, but I don't have much experience with these types of plans and I want to be sure)?

Any ideas about a price range for this document?

[Lori Friedman]

You've posted your question to the Multiemployer Plan forum, but you mention a multiple-employer plan. Could you please clarify whether you're asking about a multiemployer or a multiple-employer plan?

[Guest Green92]

You've posted your question to the Multiemployer Plan forum, but you mention a multiple-employer plan. Could you please clarify whether you're asking about a multiemployer or a multiple-employer plan?

Can you help me undeerstand the difference please?

[JanetM]

Multiple employer plan is plan sponsored by one company which allows at least one unrelated company to adopt and participate in. Example of how new one might come about: Company sells or spins off a division/unit/company so that is it no longer part of the original company. Multiple employer plan arrangement allows newly formed company to continue to participate in plan. Not used for control group entities - those are considered single employer plans. Both companies are responsible for running the plan in compliance with the plan doc.

Multiemployer plans are usually sponsored by a union group. Arrangement allows any union employer to sign on and participate. Example - Sheet Metal Workers National Pension Fund - any SMW employer can sign on to participate. Union sponsoring the plan is responisble for operations, employers are simpley required to remit hours and contributions to the plan.

[Lori Friedman]

Can you help me undeerstand the difference please?

I work almost entirely with labor organizations, so here are examples from my own client base:

Multiple-employer plan: The national union sponsors a plan to cover its own employees. Also, the national union's affilated district councils and local unions -- which are separate entities that don't form a controlled group -- can also participate in the plan and use it to provide benefits to their own employees.

Multiemployer plan: The plan covers union members, whose benefits are determined pursuant to collective-bargaining agreements. A Joint Board of Trustees, which comprises exactly 50% labor trustees and 50% employee trustees, is the plan sponsor and plan administrator. The labor organization doesn't sponsor the plan.

[Guest 401kbee]

There are several multiple employer organizations out there. I.e. Administaff, Gevity, etc. These type of companies typically act as the "Employer" for unrelated companies. Typically smaller companies outsource all of their HR, payroll and benefits services to a larger organizations such as the two named above. (they act as the Employer) These type organizations may offer a 401(k) and may be considered a multiple employer plan. In my experience, if one of these smaller companies wants to participate in the plan, they would sign a joiner agreement to allow them to participate in this type of plan. With Multiple employers, the employees of the small company are considered employees of the Multiple employer

These small companies also have the option of offering their own 401(k) plan, if you think through this, offering a plan of their own means that if they terminate their contract with the Multiple employer organization, then they don't necessarily have to terminate their participation in the 401(k) plan. The plan can continue.

With the example above, if the small employer happens to participant in the multiple employer plan, upon termination of the contract with the Multiple employer, then this also means that the participant status has also been terminated, therefore eligible for a distributable event.

Hope this helps

[QDROphile]

If you are contemplating a multiple employer 401(k) plan you need the advice of a lawyer who understands the securities law issues that are unique to those arrangements.

[Guest Green92]

Thanks for the clarification. We are contemplating starting something close/similar to a PEO (without the co-employment feature), a sort of bundeled services (HR/payroll/benefits) package. We feel it is more cost effective to offer a basic 401(k) at a good price to these clients rather than the somewhat specialized and always individualized retirement plans we offer to current clients (a lot of prevailing wage plans). We do have the resources of ERISA attorneys experienced in writing this sort of document. So I guess we will have a multi employer 401(k) plan when it's all said and done.

[JanetM]

That would be Multiple employer - not multi.

[Guest Green92]

That would be Multiple employer - not multi.

Correct you are, long day, many appologies.

[QDROphile]

I doubt that you will have a multiemployer plan of the type you describe if you care about securities law compliance. You have no exemption from registration and you will probably find registration to be prohibitive.

[Guest Green92]

I doubt that you will have a multiemployer plan of the type you describe if you care about securities law compliance. You have no exemption from registration and you will probably find registration to be prohibitive.

We are also a RIA in 9 states already. I just don't have any experience with multiple employer plan documents. I asked these questions to one of our retirement plan TPA's and they said that the docs are just about always drawn up for the individual circumstance by an ERISA attorney. I just wanted to confirm here what they told me. Thank you all for your help.

[Locust]

QDROPhile - what is the SEC issue with a multiple employer plan?

[QDROphile]

From an earlier post in this thread, " You have no exemption from registration and you will probably find registration to be prohibitive."

If you would like a starting point or more details, look at the thread that starts April 28, 2005 in the Securities Law Aspects forum. It is both edifying and amusing.

[QDROphile]

Green92:

You had better read the thread in the Securities Law Aspects, too. If you think "We are also a RIA in 9 states already" is responsive to my comment, you missed the point.

[Guest lvegas]

The referenced Securities Law Thread discusses SEC Release No. 33-6188. Also see SEC Release No. 33-6281, which clarifies 33-6188. If I remember correctly, the SEC takes the position that the '33 Act does not apply to 401(k) plans, so you may not have a need for an exemption from registration.

[QDROphile]

The referenced Securities Law Thread discusses SEC Release No. 33-6188. Also see SEC Release No. 33-6281, which clarifies 33-6188. If I remember correctly, the SEC takes the position that the '33 Act does not apply to 401(k) plans, so you may not have a need for an exemption from registration.

I am having some difficulty with your response, so I will assume that you are trying to be helpful and simply have faulty recollection and not enough time to confirm.

[Guest lvegas]

Based on your comment, I dug deeper and found that the SEC appears to have reversed field on 401(k)s subsequent to No. 6281. Still, it would be more helpful for you to state your difficulty. A wiseass, as usual.

[QDROphile]

My difficulty is that you went out of your way to create the appearance of credibility by seeming to go further with applicable authority to contradict the correct position taken in the thread and reiterated by me. The thread itseld is a strong discussion, conducted by someone with superb credentials (credentials mentioned in the thread, so you did not have to go anywhere else to get the idea that Kirk Maldonado knows what he is talking about). Yet you casually advanced the wrong conclusion.

I think you have a responsibility to be more rigorous if you take such pains and create such appearances. It would have been different it you responded to an inquiry soley with a particular recollection, and expressed uncertainty. But you did much more than that. You contradicted a solid, supported conclusion in a misleading way. Although I do not think you were deliberately misleading, under the circumstances you should not have ended with a half-assed effort (if you wish to continue the ass motif).

[Guest lvegas]

I meant that it would have been more helpful to specifically state why I was wrong (i.e., pinpoint the Diastonics No-Action Letter) as opposed to why you didn't like the way I made an incorrect statement. That notwithstanding, given the chastising I feel an obligation to at least attempt to productively flesh this discussion out further, albeit without the benefit of an exhaustive study on the interface of the securities laws and employee benefit plans.

Granted, it is never advisable to run afoul of the securities laws. But what is the actual risk here? Is this specific topic really a point of emphasis for SEC enforcement? That is to say, is the SEC actively going after multiple employer 401(k) plans that have not properly met their registration requirements? Have there in fact been any SEC or private lawsuits/enforcement actions/etc. with respect to a multiple employer plan's failure to register? In the final analysis, is the typical participant in a multiple employer plan, particularly one that doesn't provide employer stock, going to have some meaningful measure of increased protection under the securities laws by virtue of his/her plan following this seemingly technical exception to the rule? Wouldn't most of the information required in a registration statement already have been provided automatically under 404© assuming mutual funds are offered? If the investment options and basic features of a 401(k) plan that is a single employer plan are the same as those of a multiple employer plan, how is the typical participant to tell the difference? Does the answer change from a policy point of view if the multiple employer 401(k) plan is maintained by a national tax-exempt entity for its non-controlled tax-exempt affiliates (such as a national union for its constituent local unions as Lori F. described above)?

[Feel free to move this elsewhere...]

[QDROphile]

Those are good questions that should be asked before deciding whether or how to proceed with an arrangement, and different circumstances and different people may well come out differently about what is important and acceptable. But those questions will never be asked without first understanding that there is a real issue under the law, and it is a subtle issue that is outside the knowledge and imagination of most of the benefits community.

[John Feldt ERPA CPC QPA]

Original question: Are multiple employer 401(k) plan documents usually drawn up by an attorney? Are there prototypes avialable (probably not, but I don't have much experience with these types of plans and I want to be sure)? Any ideas about a price range for this document?

Multiple Employers, if they are part of a controlled group or an affiliated service group, can be placed into a prototype.

However, if they are not part of a controlled group or an affiliated service group, then either an individually designed plan or a volume submitter document will work. Be careful though, not all volume submitter documents have the necessary language for multiple employers. The cost will vary by provider.

[Guest lvegas]

Those are good questions that should be asked before deciding whether or how to proceed with an arrangement, and different circumstances and different people may well come out differently about what is important and acceptable. But those questions will never be asked without first understanding that there is a real issue under the law, and it is a subtle issue that is outside the knowledge and imagination of most of the benefits community.

I am asking the questions in hopes of getting an answer(s) that goes beyond merely issue spotting. I'm looking for practical information to assist in the analysis of the subtleties. No doubt, it is difficult to know what factors might go into any particular case where the establishment of a multiple employer plan is being contemplated. No doubt, reasonable minds can differ.

Perhaps it would be more productive and elicitive of a substantive, more rigorous response to pose the situation of a multiple employer 401(k) that already exists and up until now was unaware of its noncompliance. There have to be a significant number of similarly situated plans whose sponsors (particularly outside the realm of publicly traded corps) and fiduciaries have been operating blissfully ignorant of the reach of the securities law regime. (I know of at least one and I'm but a mere peon in the world of benefits.) To better focus, assume it is a MEP 401(k) sponsored by a major national tax-exempt association for its employees, which also covers the employees of its various local member chapters (which are not in the control group). Other than being a MEP, its offerings can't be distinguished from a single-employer 401(k) administered by a well-known TPA. Also assume that it has been in existence for 15 years and just became aware of its failure to register from reading this string.

Is the sky falling? Or is this a victimless oversight not worth the apparently heavy burden of making a corrective registration? What specific guidance on point (other than that which has already been identified) should we consider? Is there any? What are the specific risks for this MEP and what would you (or anyone else in the know) advise?

[Again, if this is sufficiently off-topic, please feel free to move.]

[QDROphile]

I am going to duck after adding one more question to the mix because a plan in the situation you describe, or any plan in a similar situation, needs expert advice.

Suppose a participant (or a class of participants) has some reason to be unhappy with the participant's deferrals. Let's say the plan had a year of negative investment return. The standard remedy for violation of registration is rescission and penalty interest. What happens if the participant (or the class action lawyer) knows the law and asserts rescission rights?