Chances for Senate passage of the Secure Act—the bipartisan bill to shore up America’s retirement system—are dwindling as the Senate’s scheduled Friday recess looms. The failure will mean a setback for advisors and broker-dealers interested in creating and branding pooled employer plans (PEPs) for the first time.

“The Department of Labor went as far as it could with its multiple-employer plan (MEP) final rule this week, but doesn’t have the authority to green-light the creation of pooled employer plans. That provision is in the Secure Act,” said Terrance Power, president of the Platinum 401(k) Inc., a third-party plan administration service provider in Clearwater, Fla.

Power said his firm has a soaring list of advisors interested in creating their own PEPs.

It looked like smooth sailing for the bipartisan Secure Act. After passage in the House in May, the bill, which for the first time gave advisors and broker-dealers the ability to create and manage pooled employer plans for small and midsize business clients, including sole proprietors, was expected to gain swift unanimous “consent” in the Senate.

That didn’t happen. As has been widely reported, Sen. Ted Cruz (R., Texas) and several other senators are holding back. Cruz objects to House Speaker Nancy Pelosi (D., Calif.) striking home schooling expenses from the expansion of eligible 529 college savings plan expenses in the legislation.

Only So Much The DOL Can Do

The Secure Act was the work-around to a final rule the DOL passed earlier this week allowing multiple-employer plans (MEPs) to be created, but only if there is a “substantial business purpose” for any group of employers or associations to exist, beyond the creation of the defined contribution plan itself.

In a separate notice, the DOL asked for comment on eliminating the need for a unified business reason, which would allow unrelated parties, including advisors, to create pooled employer plans for the sole purpose of providing plan coverage to employees.

“The DOL’s hands are tied. They don’t have a magic wand to create PEPs, which are part and parcel of the Secure Act. They need Congress to act,” Power said.

“PEPs would allow [advisors] to create a pooled plan for their own block of clients and tailor platforms for their own preferences as an investment manager,” he added. “They’d assume full responsibility for fund selection and monitoring, which relieves employers of the responsibility while achieving significant economies of scale.”

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