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Benefits of Joining a Multiple Employer 401(k) Plan

This retirement savings product offers employers reduced costs and fiduciary liability, while offering employees a great benefit.

Being a member of a group association or organization such as the New Jersey Business & Industry Association (NJBIA) comes with many benefits. These benefits rely on using the power of many small members to even the playing field against the largest companies and employers. This economy of scale helps members save costs on healthcare, office furniture, and now, employer retirement plans.

Individual employers hold a lot more power politically and financially when they work together towards the common good. This is the premise behind Multiple Employer Plans (MEPs). A MEP is an employee benefit offered by two or more unrelated employers designed to encourage smaller businesses to share the administrative, fiduciary and financial burden of offering a retirement plan for their employees. MEPs have become increasingly popular over the past decade as the burden and costs of running a 401(k) plan have increased. 

The primary benefits of participating in a MEP are reduced costs, a shift of fiduciary liability, reduced administrative burdens, and a higher level of service for those employees who participate. 

By taking advantage of economies of scale, the overall costs of offering a 401(k) are often significantly reduced. The plan administrator will negotiate investment expenses, administrative expenses, and advisory fees. The underlying investment expenses are often pooled with all of the other participating members, allowing for institutional share pricing for ETFs and mutual funds, which are typically reserved for large national organizations. The group administrator often picks up or shares the cost of the fidelity bond insurance and annual audit costs, which typically run north of $10,000 per year for companies with more than 100 employees. 

Most MEPs have investment committees with a 3(38) fiduciary advisor who oversees the investment options and selections available within the plan. This does not, however, eliminate all responsibility entirely, the employer must maintain the fiduciary responsibility to join the MEP in the first place. 

A single plan audit and a single IRS 5500 form are filed each year on behalf of the MEP. Notices and changes to the plan are typically dealt directly with the employee, leaving less work for the employer. 

Finally, when employers join a MEP, they can customize the plan accordingly to fit their employees’ needs. Employers can decide whether to offer a matching contribution, profit sharing, or provide individual one-on-one financial planning, etc.  

NJBIA offers its own MEP Retirement Solution plan, which is administered by the Employers Association of New Jersey and powered by BCG Securities. For more information, please visit www.njbia.org/401K.

About the Author 

James O’Donoghue CRPS® is a Chartered Retirement Plan Specialist and Investment Consultant with BCG Securities.

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