The IRS is seeking comments on a proposal that would make it easier for unrelated employers to participate in multiple employer defined contribution plans.
The notice of proposed rule-making in the Federal Register on Wednesday addresses what many consider the biggest barrier to employers joining MEPs, the risk that one employer's non-compliance could disqualify all members.
The IRS is proposing an exception to its unified plan rule, more commonly referred to as the "one bad apple rule" that would allow other employers in the MEP to claim the exemption if certain conditions are met, such as the disqualifying employer being unable or unwilling to correct the problem or to provide information. The compliant employers would have to take actions to separate the assets and accounts of the disqualifying employer, under the proposed rule.
Comments are due in 90 days.
The IRS consulted on the proposal with the Department of Labor, which has also proposed rule changes to encourage employers to participate in open MEPs. Both efforts follow a White House executive order directing officials at the departments of Labor and Treasury to expand retirement savings options, including MEPs.
The DOL proposal was set back by a March 28 District Court ruling on a DOL final rule for association health plans, which blocked provisions on the definition of "employer" that legal experts warn could also apply to MEPs.
Legislation making it easier for employers to join MEPs is also part of retirement security legislation making its way through Congress. The House easily passed the Setting Every Community up for Retirement Enhancement Act of 2019 on May 23 and awaits action in the Senate.