The President’s executive order also calls on the Labor Department to consider allowing small businesses to jointly offer 401(k) plans. Historically, the Department has prevented unrelated businesses such as car dealerships and consulting firms from collaborating to offer so-called open multiple employer plans because of the potential for abuse.
Open multiple employer plans, which have bipartisan support in Congress, would eliminate the mandate that businesses have a common interest in order to pool their retirement assets into a single 401(k). The change would cut expenses and conceivably help more firms offer savings plans. The order also calls on the Labor and Treasury departments to reduce administrative burdens and paperwork that stand in the way of small business retirement plan creation.
Easing regulatory roadblocks and costs would definitely encourage more entrepreneurs and small business owners to create retirement plans, said Dennis Nolte, a wealth manager with SeaCoast Bank, Oviedo, FL. “It would be fantastic to reduce cost, regulation and liability for plan sponsors of small 401ks and other qualified plans,” Nolte said.
“The last time we had any sort of legislation to encourage small business retirement plans was in 2001 and that was a reactive measure in the face of the financial meltdown,” Nolte said. “Proposing this now, during a prosperous time, is prudent and welcome.”
“The goal is to find policy ideas that will help make creating and joining a 401(k) plan a more attractive proposition for small employers,” Preston Rutledge, assistant secretary of the Employee Benefits Security Administration at the Labor Department, told reporters at a presser announcing the executive order.
Any regulatory or legal changes “that allow businesses to band together so that they can get better rates and better plans for their 401(k)s is a win,” said Dwyer. “Anything that increases competition should decrease costs and that’s a win for smaller companies when it comes to spurring plan creation.”