DOL Issues Association Retirement Plan (a.k.a. MEP) Final Regulations

Scheduled for publication in the Federal Register this week are Department of Labor (DOL) final regulations on association retirement plans, a name that in very general terms equates to multiple employer plans, or MEPs. In addition to the final regulations, the DOL has issued a companion request-for-information document, “Open MEPs” and Other Issues.

The final regulations provide guidelines under which more than one employer may be treated as a single employer for purposes of retirement plan participation. An important objective of such arrangements is the sharing of plan administration responsibilities and, potentially, costs, for a retirement plan that covers eligible employees of the participating employers.

The guidance does not create or legitimize so-called “open MEPs,” under which multiple participating employers share no common characteristic, affiliation, or purpose (as has been proposed in pending legislation). But this guidance—a response to an August 2018 Executive Order issued by President Trump—would broaden the circumstances under which MEP formation could take place.

Final regulations on association health plans were previously published and have encountered legal obstacles. Whether there will be similar issues with this association retirement plan guidance remains to be seen.

In this guidance the DOL states that “expanding access to workplace retirement plans is critical to helping more American workers financially prepare to retire.” Like the proposed regulations, this guidance applies only to defined contribution retirement plans. The final regulations have no superseding effect on DOL Interpretive Bulletin 2015-02, which gave states the authority to establish state-facilitated MEPs.

The final regulations are substantially similar to the proposed regulations. Highlights include the following.

Bona Fide PEO

The final regulations (like the proposed) include four requirements for a professional employer organization (PEO) to qualify as a “bona fide” PEO that may act as an “employer” under ERISA Section 3(5) for purposes of sponsoring a MEP covering the employees of client employers. One of these four requirements requires the PEO to perform “substantial employment functions” on behalf of the client employers.

Whether a PEO performs “substantial employment functions” on behalf of its client employers is generally determined based on facts and circumstances. But in an effort to provide regulatory certainty, the final regulations contain a safe harbor separate from the facts-and-circumstances test. This safe harbor has been simplified in the final rule.

The final rule contains only one safe harbor for all PEOs. Instead of nine criteria, the new safe harbor contains only four criteria. And instead of allowing a PEO the choice of selecting five from among the nine criteria, the new safe harbor requires that the PEO satisfy all four criteria.


The final regulations include a severability provision, which provides that if any of the provisions are found to be unenforceable, or stayed by court action—pending further agency action—the remaining provisions of the regulations would remain operative and available. (The regulations include examples of how this severability provision would be applied.)