Our Thoughts

Senate Bill to Boost 401(k) Plan Adoption

New bipartisan legislation in the Senate aims to boost retirement plan adoption by small employers through a particular type of defined-contribution plan known as an open Multiple Employer Plan (MEP).

The Retirement Enhancement and Savings Act of 2018 is co-sponsored by committee chairman Orrin Hatch (R-Utah) and ranking member Ron Wyden (D-Ore.) A provision of the bill would create Pooled Employer Plans (PEP), which is a type of open MEP to allow small businesses to band together in a commonly defined contribution plan.

Since a greater number of small employers would share a defined contribution plan and therefore boost their economies of scale, one benefit of the PEP would be lower plan costs for investors. Policymakers hope a combination of higher quality plans, easier plan administration and less fiduciary liability for small employers will help close the gap in retirement plan coverage between large employers and small employers. Something policymakers have been trying to do for a long time.

 

Larry Adams. CPFA