A “many employer pension strategy” (or MEPP) is a certified retirement strategy, such as a 401(k) strategy, that is sponsored by many unrelated employers.
The Employee Retirement Earnings Safety Act (ERISA) applies to MEPPs, which need to meet the specifications of the Internal Income Code in order to get employer contributions for employee retirement rewards.
Farmers' cooperatives business enterprise franchises religious, charitable and educational institutions and Chambers of Commerce are popular examples of connected or affiliated employers that may perhaps comprise a many employer pension strategy.
Several employer pension plans are not to be confused with “multi-employer” pension plans, which involve unions and are defined below the Labor Management Relations Act of 1947, identified as the Taft-Hartley Act. Multi-employer union plans are typically discovered in the hotel, trucking, and building industries. Multi-employer plans are also governed by ERISA.
A “principal strategy sponsor” of the MEPP is a single entity that sets up the pension advantage. Day-to-day operational duty for the strategy, and related fiduciary duty, is held by this principal strategy sponsor.
An “adopting employer” that joins the strategy, also identified as a “strategy co-sponsor,” relies on the principal strategy sponsor for pension strategy administration and asset oversight. Consequently, the co-sponsor normally does not bear any fiduciary duty or liability in regard to the many employer pension strategy. In this regard, the many employer strategy can be very eye-catching to firms considering that they can give the rewards of an employee pension strategy with no incurring any fiduciary threat.
A “single strategy document” controls the many employer pension strategy. This governing document can be written especially for 1 certain strategy, or bought from a vendor for adoption by the MEPP, but in either case the strategy need to be submitted to the Internal Income Service for an affirmative determination letter. Usually all adopting employers agree to abide by 1 constant set of guidelines in regard to strategy eligibility, vesting and other elements of strategy management.
Conditions that may perhaps outcome in ERISA litigation or other legal disputes for a many employer pension system contain the following:
- If a single co-sponsor does not meet all participation specifications, such as the “major-heavy” guidelines, the higher MEPP and all its members may perhaps be disqualified by the IRS.
- “Settlor” and “sponsor” responsibilities need to be clearly defined and followed to keep away from strategy expenditures that may perhaps basically not be permissible.
- Fiduciary responsibilities need to be clearly defined and understood by all relevant parties of the principal strategy sponsor.
Program sponsors who have inquiries about administration of a many employer pension strategy really should seek the tips of a certified and knowledgeable ERISA lawyer.