There is a type of retirement plan arrangement known as a Multiple Employer Plan (MEP), where two or more employers pool their resources to establish a single defined benefit or defined contribution plan for their employees. If they use a 401(k) plan, then employees from all participating employers can make contributions up to the maximum possible amount prescribed by the IRS for that year. All MEPs are run by a MEP sponsor that administrates the plan and assumes fiduciary responsibility for the plan. All employers that join the plan are known as "adopting employers".
There are three types of MEPs in the marketplace today, broken down as follows: MEPs can be sponsored by any of the following entities: Despite the similarity in their names, these are two separate programs. Multiple employer plans are sponsored by at least two unrelated employers. The plan is considered to be a qualified plan under ERISA guidelines and must adhere to all rules outlined in IRC section 413(c). A multi-employer plan is a collectively bargained plan between multiple employers, usually within the same or related industries, and a labor union. Multiemployer plans are often referred to as Taft-Hartley plans, and they must comply with IRC section 414(f). MEPs are ultimately a method used to provide a retirement savings plan to employees of businesses that do not have the resources to offer a separate plan by themselves. Under the MEP arrangement, employers can share the burden of offering and administrating the plan. It is possible for someone to participate in more than one 401(k) plan, but the contribution limits apply to the individual person, not the plan. This means that in 2020, an employee under age 50 who participates in two 401(k) plans could not contribute more than a total of $19,500 between the two plans. He cannot contribute $19,500 to one plan and then make a separate contribution of the same amount to the other plan. The total amount of contributions cannot equal more than the aggregate contribution limit as set by the IRS in a given year. If the employee quits working for one of the employers, he or she may be able to roll his or her 401(k) plan with that employer over to the other plan in which he or she is participating. Contribution limits do not include rollover amounts, so this would not affect the amount that the employee could contribute to the remaining plan for that year.Types of MEPs
In order to participate in the plan, an employer has to be a bona fide member of this group. All employers that are members of the group must have the authority to make plan decisions.
Companies that are in the same industry as other members of the MEP can also join even if they are not within the prescribed geographic region.
Different MEP Sponsors
Multiple Employer Plan vs. Multi-Employer Plan
Multiple Employer Plan 401(k) FAQs
A 401(k) plan is a retirement plan offered by an employer designed to help employees save for retirement.
A Multiple Employer Plan (MEP) 401(k) is an employer-sponsored retirement plan that is sponsored by more than one unrelated business or organization. It allows employers of any size to join together in a single retirement plan with pooled administrative costs, greater investment options, and cost savings for participants.
Any employee who works 1,000 hours or more per year in businesses that have joined the MEP 401(k) is eligible to participate. The plan sponsor determines eligibility requirements based on factors such as age and length of employment with the participating employers.
Employers must be approved by the plan sponsor to participate in the MEP 401(k). The cost of administering the plan and contributions are shared among all participating employers.
MEP 401(k)s offer many advantages over traditional employer-sponsored retirement plans, such as greater investment options, cost savings, administrative simplicity, and tax deductions for businesses. Additionally, employees can benefit from having access to more diversified investments and lower fees than those available through individual employer plans.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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