The Department of Labor is considering a prohibitive transaction exemption for pooled employer plan and other multiple employer plan fiduciaries that would provide more latitude in complying with ERISA.
The department is seeking input on the possible parties, business models and conflicts of interest that respondents anticipate will be involved in the formation and ongoing operation of pooled employer plans, or PEPs, as well as similar issues involving multiple employer plans, or MEPs, it said in a request for information that will be published Thursday in the Federal Register.
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 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.
Separately, in September, the Labor Department issued a final rule clarifying the circumstances under which an employer group, association or a professional employer organization could sponsor a MEP. Unrelated employers can join a PEP, which will be available starting Jan. 1, unlike the MEPs under the recent Labor Department rule, where a common location is required.
"Before granting an exemption, the department must find that the exemption is administratively feasible, in the interests of plans and their participants and beneficiaries, and protective of the rights of participants and beneficiaries of plans," the Labor Department said in its request for information.
The request for information lists 15 distinct questions, many that include multiple parts, such as:
- What conflicts of interest, if any, would a pooled plan provider (along with its affiliates and related parties) likely have with respect to the PEP and its participants? Are there conflicts that some entities might have that others will not?
- To what extent will a pooled plan provider be able to unilaterally affect its own compensation or the compensation of its affiliates or related parties through its actions establishing a PEP or acting as a fiduciary or service provider to the PEP?
- What role will the entities serving as pooled plan providers or MEP sponsors, or their affiliates or related entities, serve with respect to the investment options offered in PEPs and MEPs?
The comment period will last 30 days.
"We encourage all interested parties to submit comments in response to this request," said Jeanne Klinefelter Wilson, acting assistant secretary of labor for the Employee Benefits Security Administration, in a news release. "The responses will help the Employee Benefits Security Administration evaluate the need for a proposal on a new exemption."