The U.S. Department of Labor (DOL) proposed regulations today that would for the first time permit small businesses to join together to share the administrative costs of offering a workplace retirement plan to their employees.

If the DOL’s proposal to expand open multiple employer plans (MEPs) is successful, it will create significant new opportunities for investment advisors who work with small business owners. Fewer than  one-third of businesses with less than 50 employees currently offer a retirement plan, according to the General Accounting Office.

“This proposal will expand retirement savings opportunities for millions of small-business employees,” said Aliya Wong, U.S. Chamber of Commerce executive director of Retirement Policy.

The proposed regulations, which were mandated by President Trump in an executive order earlier this year, are available here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-23065.pdf.

Secretary of Labor Alexander Acosta credited President Trump for focusing on small businesses and the need for employee retirement plans.

“President Donald J. Trump is moving to expand quality, affordable workplace retirement plan options for America’s small businesses and their employees,” Acosta said. “Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans. Association retirement plans give these employers a simple and less burdensome way to offer valuable retirement benefits to their employees. The proposed rule helps working Americans and their families take care of themselves in their retirement years.”

The DOL notes that 38 million Americans do not have access to workplace retirement plans. Association retirement plans would permit companies within a city, county, state or multi-state metropolitan area, or within a particular industry, to band together. Sole proprietors, as well as their families, would also be permitted to join such plans.

Wong said the proposal will allow small businesses to pool resources together to offer retirement plans, resulting in lower plan fees and fewer administrative burdens. “Under pooled plans, costs are shared among the adopting employers and can provide centralized payroll, one investment line-up, and one annual report and audit for the entire plan. This pooling translates into substantial economies of scale and cost efficiencies over stand-alone plans for small businesses,” Wong said.

Combined with the new association health plans DOL announced this year, small employers can now offer a complete benefit package to employees and have the ability to compete for the best talent, Wong said. These necessary benefits allow smaller employers to compete and retain top employment talent and creates retirement and healthcare security for millions of Americans, she added.

DOL says that the proposal would enable small businesses to offer benefit packages comparable to those offered by large employers. DOL expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses’ prowess when negotiating with financial institutions and other providers.

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