Multiple Employer Plan 401(k)

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 29, 2023

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".

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Types of MEPs

There are three types of MEPs in the marketplace today, broken down as follows:

  • Closed MEP - This type of MEP is made up of multiple unrelated employers that have employees and a sponsor that is a bona fide group, association, or organization with which member employers share a nexus or interest other than the retirement savings plan.

    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.
  • Association Retirement Plan - This type of MEP is more relaxed than the closed MEP. It allows employers in related or unrelated industries that share a common geographic area such as a state or region to form a MEP.

    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.
  • Open MEP - This is where members of the MEP have no common characteristics and don't have to be located in the same geographic region. The retirement plan itself is the only thing that they have in common.

Different MEP Sponsors

MEPs can be sponsored by any of the following entities:

  • A board of directors - The directors are appointed by the adopting employers to sponsor the plan and also appoint and monitor plan fiduciaries.
  • Co-sponsorship - Each adopting employer is a co-sponsor of the plan. This arrangement is sometimes combined with a board of directors so that the adopting employers can maintain firm control of the plan.
  • A trade or industry group - ERISA allows each of these to be considered an employer that is eligible to sponsor a MEP. This includes local organizations such as a Chamber of Commerce.
  • A third party - A professional employer organization (PEO) or a similar professional provider assumes the responsibility of performing various types of management duties such as payroll, workers' compensation, and training.

Multiple Employer Plan vs. Multi-Employer Plan

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.

Multiple Employer Plan 401(k) FAQs

About the Author

True Tamplin, BSc, CEPF®

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.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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