DOL Announces Final Rules for ARPs

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.