A federal rule now in effect allows companies to team up through certain employer groups and professional organizations to offer a shared 401(k) plan to their workers. The rule, which aims to expand the use of so-called multiple-employer plans, comes as the Secure Act continues to idle in the Senate.
In their article “Small firms may have a new way to offer 401(k) plans to their workers,” the news organization quoted Washington, D.C. partner Brad Campbell on the anticipated impact of the rule.
Speaking about the Secure Act and the DOL’s new rule, Campbell said “Both go to the same issue, which is how do we get plans to more workers.”
CNBC reports that small-business owners have cited cost and administrative headaches as reasons they don’t offer retirement plans of their own to their workers. The new Labor Department rule aims to reduce those issues by making regulatory changes to allow local or state associations of employers — i.e., chambers of commerce — to sponsor a 401(k) plan that members can offer to their employees. Companies located far apart that want to band together would need to be in the same industry.
The Secure Act, meanwhile, includes a provision to allow companies to join a multiple-employer plan regardless of their membership in a professional organization or their industry. In other words, their only commonality would be their participation in a shared 401(k) plan for their workers. The measure also would allow financial services firms to offer those expanded multiple employer plans to their business customers, Campbell said.
According to Campbell, the DOL’s new rule “has potential value in the marketplace, but it will probably be smaller in scale than the [Secure Act provision] would be.”