Retirement Plans for Small CompaniesBy
A proposal from President Obama could make it easier for small companies to offer retirement plans for their employees.
President Obama is likely to find bipartisan support in Congress for his proposal to allow small businesses to form multiple employer plans (MEPs). The MEPs would enable small companies to join together to offer retirement plans and thus lower administrative costs. Current regulations under the Employee Retirement Income Security Act (ERISA) limit MEPs to companies with a nexus. Both Democrats and Republicans in the House and Senate introduced similar proposals as part of retirement reform bills in the 2013-2014 congressional session. None advanced. But a bipartisan working group of members of the Senate Finance Committee produced recommendations in mid-2015 endorsing MEPs.
Obama’s 2017 budget includes a proposal to eliminate the “common bond” requirement and provides a missing rationale for MEPs by requiring companies to automatically enroll workers without access to a workplace plan in an IRA. Small businesses that begin offering retirement plans or choose to automatically enroll workers in existing plans would receive tax credits.
Alicia Munnell, the Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management, says, “Once employers are required to provide coverage either under a plan that they choose themselves or under a new auto-IRA program, they may become more interested in adopting an MEP, with its low cost and accessibility.”