NQ Client Services Manager (Private Label) (Lake Mary FL / Dallas TX)
Associate Attorney - Tax (Honolulu HI)
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|Question 315: I heard the DOL has sought a temporary restraining order against Matthew Hutcheson in connection with the open MEP he dealt with. Does it clarify the approach the DOL is taking in dealing with open MEPs?|
Answer: Yes, it does.
Mr. Hutcheson has been indicted in connection with his handling of the Retirement Security Plan & Trust (RSPT). He has pled not guilty, but remained as a fiduciary. The DOL applied for a Temporary Restraining Order (TRO) to have him removed, and on May 16 the court granted the motion, setting the stage for a preliminary injunction.
RSPT is an open MEP. In its Memorandum in Support of Application for Temporary Restraining Order [click], the DOL had this to say about the RSPT arrangement (see pages 4 and 5):
In fact, RSPT was not a single "multiple employer plan" pursuant to ERISA. This is because there was no commonality of employment-based interest among the participating employer sponsors of the plans apart from the provision of retirement benefits, and there was no control of the program by the participating employers such that RSPT qualified as a "group" or "association" of employers as required to be a single plan covering multiple employers for purposes of ERISA section 3(5). Thus, RSPT failed to qualify as a single "pension plan" for purposes of ERISA section 3(2), since it was not established or maintained by an "employer" for purposes of that section.The Memorandum revisits this issue at page 16:
As noted above, RSPT was not a single "multiple employer plan" pursuant to ERISA because there was no commonality of employment-based interest among the participating employer sponsors of the plans apart from the provision of retirement benefits, and there was no control of the program by the participating employers such that RSPT qualified as a "group" or "association" of employers as required to be a single plan covering multiple employers for purposes of ERISA section 3(5). Thus, RSPT failed to qualify as a single "pension plan" for purposes of ERISA section 3(2) since it was not established or maintained by an "employer" for purposes of that section.In support of its position, footnote 4 cites:
See, e.g., MDPhysicians & Associates, Inc. v. State Bd., Ins., 957 F.2d 178, 186 (5th Cir.), cert. denied 506 U.S. 861 (1992) ("the entity that maintains the plan and the individuals that benefit from the plan [must be] tied by a common economic or representation interest, unrelated to the provision of benefits") (quoting Wisconsin Educ. Assoc. Ins. Trust v. Iowa State Bd., 804 F.2d 1059, 1063 (8th Cir. 1986)).That case deals with a welfare plan, but the DOL, as it has so often in its advisory opinions, views the ERISA definition of employer as being the same between retirement and welfare plans (as indeed it is).
The DOL's litigation position in a single case is not the same as an opinion letter, but it certainly gives an indication of where the DOL is going, and it is not going well for open MEPs. This could also be seen from the testimony of Phyllis Borzi (Assistant Secretary of Labor) to a Senate committee on March 7, when she said:
While it is clear from my testimony that the Department supports efforts to expand small business coverage, it is just as important that ERISA's protections for workers' pensions be maintained. In that regard, the Department has more recently become aware of promoters marketing multiple employer plans, or "MEPs," that do not involve collective bargaining with an employee representative. These arrangements, often called "open MEPs," purport to allow totally unrelated businesses to join together to offer a collective pension plan. Promoters claim that these arrangements relieve businesses of their ERISA reporting and fiduciary obligations in connection with administering the plan or monitoring the plan investments and service providers. Proponents say such arrangements can provide the participating employers with a way to pool resources and reduce administrative costs. There are several bills pending in Congress which call for the Department, in coordination with the Treasury Department, to provide fiduciary relief and simplified administrative, reporting and disclosure obligations for multiple employer plans. We are currently analyzing these proposals.In light of this testimony, and the DOL's position in the TRO, it seems irresponsible to urge an employer to enter into a MEP without explaining the risks attending that choice, and that the open MEP may not "relieve businesses of their ERISA reporting and fiduciary obligations" as hoped.
I discuss the issue of open MEPs further, along with all other matters related to the care and feeding of MEPs, in the 6th edition of my book, Who's the Employer.
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