The Department of Labor (DOL) has issued final regulations which make it easier for small businesses to provide retirement savings plans through “association retirement plans” (ARPs), by allowing small businesses to band together to offer 401(k) and other defined contribution plans to their employees.
Under the rule, ARPs could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide. In addition to association sponsors, the plans could also be sponsored through Professional Employer Organizations (PEO). A PEO is a human-resource company that contractually assumes certain employment responsibilities for its client employers.
By expressly permitting these new plan arrangements, the rule enables small businesses to offer benefit packages comparable to those offered by large employers. It also follows an executive order which focused on expanding workplace retirement plan options for small businesses and their employees. The Department expects the plans to reduce administrative costs through economies of scale, as well as to strengthen small businesses’ hand when negotiating with financial institutions and other service providers. The final rule effective date is September 30, 2019.
Interested employers should read the final rule and consider discussing with ERISA counsel or other experts to determine if such option is appropriate for their business.