Multiple Employer Retirement Plans: The Truth, The Rumors, and Buying in Bulk

Ary Rosenbaum
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I always see multiple employer plans (MEPs) as the ability of small plans to group together and buy in “bulk”. In my mind, the MEP should act as the Costco or Sam’s Club of retirement plans. By buying in “bulk” and grouping together with other unaffiliated employers, plan sponsors can get a better product at a better price. At least that’s the way it should be. For me MEPs is the ability of smaller plans to have a greater choice in the choice of plan providers, allowing them to get services from unbundled providers that they probably could not afford as a standalone plan. The pricing of daily valued 401(k) plans is highly dependent on plan asset size because plan expenses shrink when expressed as a percentage of the plan’s assets as assets grow. Taking advantage of the economies of scale of a MEP, participating employers can get a better plan at a better price. In addition, being a part of an MEP can help defray fiduciary liability.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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