The Department of Labor proposed a rule Thursday that would establish requirements for registering as a pooled plan provider for pooled employer plans, known as PEPs.
PEPs were created with the signing of the SECURE Act in December, which made it easier for employers in unrelated businesses to join so-called "open" multiple employer retirement plans for their employees. Employers were previously discouraged from doing so because they would each still have to file separate Form 5500s and conduct separate annual audits, requirements that were eliminated with the new legislation. A PEP must have a pooled plan provider designated as a named fiduciary, plan administrator and the person responsible for specified administrative duties.
PEPs will be available starting Jan. 1.
The SECURE Act stipulates that pooled plan providers must register with the Labor Department before beginning operations, hence the action Thursday.
The Labor Department estimated that roughly 3,200 unique entities will initially register to serve as pooled plan providers, with record keepers and plan administrators of existing defined contribution plans the most likely to enter the market.
The Labor Department proposal would create a new form — EBSA Form PR — for interested parties to submit.
The proposed rule would require an initial registration filing and supplemental filings to report any changes, information about each specific pooled employer plan before initiation of operations, and information on specified reportable events. It would also require a final filing once the last pooled employer plan has been terminated and ceased operations.
"The department believes that the initial registration, supplemental filing and final filing requirements, when combined with the Form 5500 annual reporting requirements, will give the department the timely access to pooled plan provider information needed to fulfill the monitoring and oversight tasks the SECURE Act placed on the agencies and would be less burdensome and less costly for pooled plan providers and pooled employer plans than some alternatives that were considered," according to the proposal.
PEPs will give employers, "especially small unrelated employers, a way of offering their employees a workplace retirement savings option with reduced burdens and costs," said Jeanne Klinefelter Wilson, acting assistant secretary of Labor for the Employee Benefits Security Administration, in a news release. "This proposal lays the groundwork for a streamlined registration process so that providers can get pooled plans up and running."
The proposal will have a 30-day comment period.
In June, the Labor Department issued a request for information on the possible parties, business models and conflicts of interest that respondents anticipate will be involved in the formation and ongoing operation of PEPs. The department said it is considering a prohibited transaction exemption for PEP and other multiple employer plan fiduciaries that would provide more latitude in complying with ERISA.