10 ADVANTAGES OF MULTIPLE EMPLOYER
RETIREMENT PLANS
BENEFITS FOR EMPLOYERS
By Pete Swisher, CFP®, CPC
EXECUTIVE SUMMARY
MEPs can save an employer time, money, headaches, and risk:
1. The employer’s name comes off of the plan document
2. There is only one plan document instead of one for each employer
3. Assets are pooled for economies of scale
4. Labor is pooled and streamlined
5. There is reduced fiduciary responsibility and liability for each employer
6. The “dead trustee problem” (continuity in fiduciary appointments) goes away
7. There are fewer headaches of the sort leading to formal corrections
8. The burden of educating oneself on fiduciary duties is dramatically reduced
9. Vendors are professional fiduciaries instead of non-fiduciaries and therefore
responsible for the consequences of failure
10. MEPs are built for and around communities
Not all of these advantages exist in every Multiple Employer Plan “MEP”, but in a wellstructured MEP all ten are present. (Throughout the article, “well-structured” is used to
clarify when a given advantage is available only under a particular governance
structure and is not necessarily inherent to the MEP itself—the key elements are an
independent board, vendors who are professional fiduciaries, and separate lines of
vendor appointment.)
MEPs are arguably the least risk retirement plan for many employers, and are the most
cost effective way to outsource the responsibility and labor that come with sponsoring
and serving as a fiduciary of one’s own stand-alone plan.
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com
INTRODUCTION
“Save me time or save me money or I don’t have time for you.” So said a small employer in the
Pacific Northwest a few years ago to a friend of mine who runs a retirement plan advisory
practice. The challenges confronting the business owner had a lot to do with the economy,
operational hurdles, and getting more customers; the 401(k) plan simply wasn’t on his list of
concerns at the time. Most business owners and executives can identify with the business owner
in this story, and the point is that the desire to streamline, simplify, and reduce the need to pay
for labor to fulfill non-mission-critical functions is nearly universal.
MEPs save employers time, money, headaches, and risk. Therefore they are enjoying a surge of
interest among employers and the investment advisors who serve them because they fill an
unmet need. The following are ten examples of how MEPs benefit participating employers.
TEN ADVANTAGES OF MEPs
No. 1: The employer’s name comes off of the plan document
A typical plan document for a retirement plan is 60-90 pages, and it identifies at least two
named fiduciaries—a trustee and an administrator—and sometimes three (some documents
add a separate party identified as the “named fiduciary,” which is confusing since both the
trustee and administrator are also named fiduciaries). Most plan documents name the employer
as the administrator and named fiduciary and name a business owner or executive (or a
committee of employees and executives) as the trustee. Few employers know what it actually
means, legally, to be named to these roles in a plan document, but they know it means
something. Those who study fiduciary law know that, in fact, being a named fiduciary means
taking on significant responsibility and potential liability.
In a MEP, someone else fills the named fiduciary roles—an employer who joins the MEP
(“adopting employer”) is not named in the document. It is also possible to outsource the named
fiduciary roles in a single employer plan, but it’s expensive, few employers even know it’s
available, and there are few experienced service providers who offer outsourcing (Pentegra
offers such services and has done so since the 1940s). A MEP is the easiest and most cost
effective way to get your name off the plan document.
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com
No. 2: There is only one plan document instead of one for each
employer
A MEP is a single plan for tax purposes and operates under rules set forth in Internal Revenue
Code Section 413(c)1. Certain costs and headaches therefore disappear:

The plan document fee charged by most vendors for a new client is eliminated or
reduced (usually $500 to $2,000 one time)

The charge for restating the plan document (usually $1300 to $2000 per employer every
five years) is dramatically reduced since each adopter need only do a limited scope
filing

Mandatory “interim amendments” caused by law changes are done once for all
adopters instead of every adopter having to do it separately, saving on fees each time
there is an amendment—and there is an amendment in most years.

Ancillary documents based on the plan document (e.g., the Summary Plan Description
and Summaries of Material Modifications) are easier to generate and maintain, which is
part of a myriad of small economies of scale that allow the service providers to charge
MEPs lower fees than they otherwise would.
No. 3: Assets are pooled for economies of scale
The MEP structure provides a favorable platform for negotiating the lowest possible cost mutual
fund shares. Most funds have multiple share classes with different costs, and the least expensive
shares require the largest minimum investments—such as $1 million, $5 million, $25 million, and
even more. A small plan cannot realistically expect to ever have access to the lowest cost,
institutional share classes, but a MEP helps make this possible.
Similarly, the MEP structure can help with negotiating favorable treatment during “soft closes,”
which is the term used to describe the closing of a mutual fund to new investors. Suppose a fund
has blockbuster returns and doubles in size—the fund manager may wish to limit fund growth to
retain investment flexibility, since a fund that grows too large may lose nimbleness. The manager
therefore closes the fund to new investors, but existing investors are permitted to continue
making contributions—and a retirement plan is considered an existing investor.
The MEP also makes the job of the MEP’s investment advisor or manager easier: there is a single
fund menu that is the same for all adopting employers, and therefore a single quarterly analysis
and report that is easily delivered and explained to all adopting employers. Fund replacements,
when they are necessary, are done once for the entire arrangement instead of each employer
Note that a MEP may or may not be treated as a single plan by the Department of Labor (based on
whether the plan is an “open” or “closed” MEP), but the practical consequences for adopting employers
are few since the compliance differences are generally someone else’s problem. See DOL AO 2012-04A.
1
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com
working with its own advisor and vendor separately. Easier is better because it allows the advisor
to charge less.
Purchasing power due to economies of scale is a fundamental premise of a MEP.
No. 4: Labor is pooled and streamlined
Labor in a well-structured MEP is shared, streamlined, and centralized in the hands of a
professional administrator. Instead of each adopting employer having to establish its own
separate plan with its own procedures and vendors, conduct due diligence on and oversee
each vendor, and perform dozens of minor chores that come with being responsible for one’s
own plan, much of the labor is shifted to professional fiduciaries supervised by a board of
directors consisting solely of adopting employers. This sort of outsourcing is possible in a single
employer plan, but it’s expensive. The MEP structure, on the other hand, is the most cost
effective way to hire a professional fiduciary. MEPs may or may not be the least expensive plans,
but they are the most cost effective way to do the least work.
Mid-sized companies who are conscientious about governing their plans properly frequently
devote well over 100 labor hours per year to the plan (though they are often surprised to see it
added up). A MEP can cut that time and associated cost dramatically, as the following
discussion illustrates.
Fewer meetings with fewer people and less to do at each meeting
A common theme in retirement industry conference sessions and webinars is “best practices for
retirement plan oversight committees.” The gist of the message is that every employer
sponsoring a plan should have such a committee, it should meet regularly, there is a laundry list
of items the committee is supposed to do, and someone needs to keep a written record of the
proceedings to prove that the laundry list got done. I’ve met very few employers who are
genuinely interested in devoting the time, energy, and personnel needed to do this well if they
could otherwise avoid it.
In a MEP, the committees of each adopting employer are replaced, for most purposes, by a
single committee (or board of directors) overseeing the whole plan. The modest obligation to
monitor the decision to adopt the MEP that each employer retains is easily satisfied with fewer
meetings, fewer people, and less to do at each meeting.
Taking turns paying attention
In a well-structured MEP, employers get to “take turns paying attention”: they share the task of
serving on the plan’s board of directors when it’s their turn, and otherwise the employer’s role is
reduced to a modest oversight function—making sure the overall MEP arrangement continues
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com
to be a prudent choice for the employer’s own employees. This is a significantly reduced
commitment compared to the obligations imposed by one’s own separate plan of which one’s
own people must serve as the fiduciaries.
Operational chores that go away or get easier
In addition to the time savings attributable to fewer meetings and reduced oversight, there are
a number of routine operational tasks that are eliminated or become easier when someone else
is responsible for them. The following examples are all common sources of administrative error
leading to formal correction under the three primary government correction programs 2, and
responsibility for all of them is almost completely eliminated in a MEP:

Reviewing, signing, and submitting the Form 5500

Varying levels of involvement with loans, hardship distribution, QDROs, in service
distributions, and other participant events

Records retention (as required by ERISA Sections 107 and 209), including an indefinite
historical chain of plan documents with amendments and determination letters

New hire processing, including determining eligibility, mailing/emailing materials before
the entry date and ensuring each eligible employee has the chance to enroll

Ensuring that any auto-enrollment, auto-escalation, or QDIA3 provisions are implemented
if a participant fails to make an affirmative election

Reviewing and approving the documents your TPA sends you (for most employers there
are multiple documents per year, each of which arrives with the admonition to seek help
from an ERISA4 lawyer)

Mailing of various notices and other documents to active employees; compliance with
the DOL’s rules on electronic delivery

Mailing of notices to terminated employees who still have account balances, and to
other “stragglers” such as alternate payees under QDROs and beneficiaries of deceased
participants.
No. 5: There is less fiduciary responsibility and liability for each
employer
A MEP is arguably the least risk retirement plan solution for many, if not most, employers. An
adopting employer is still a fiduciary, but his or her responsibility in a well-structured MEP is limited
EPCRS, the IRS’ Employer Plans Compliance Resolution System; DFVCP, Delinquent Filer Voluntary
Correction Program, for those failing to file a complete Form 5500, audit, and attachments on time; and
VFCP, Voluntary Fiduciary Compliance Program, for correction of certain common prohibited transactions.
For information on how frequently employers are forced to use these programs, see Statistics and Surprises
on the Pentegra Website.
3 Qualified Default Investment Alternative under ERISA Section 404(c)(5)
4 Employee Retirement Income Security Act of 1974, as amended
2
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com
to three things: 1) the need to prudently select and monitor the MEP arrangement as a choice
for his or her employees; 2) sending contributions on time; and 3) sending clean and timely data
to the service providers.
Aside from the need to send timely contributions and data, the risk to an employer is limited to
the risk that someone would sue for imprudence with respect to choosing the MEP for one’s
employees, and to co-fiduciary liability under ERISA Section 405(a), which is not difficult to avoid.
(e.g., if you know a fiduciary is stealing from the plan, you have to do something; if you don’t
know the fiduciary is stealing, you do not have co-fiduciary liability—you have to know about it
and fail to act to be liable.)
The risk reduction is a direct consequence of taking your name off of the plan document, and of
outsourcing the bulk of the responsibility for operating the plan to a board of directors
overseeing professional fiduciaries who actually do the work. The law is clear about the division
of responsibility and liability:
ERISA Section 405(c) says that a plan may allow an employer or fiduciary to allocate or
delegate fiduciary responsibilities to others, and that if the others breach their
responsibilities the one who did the delegating “…shall not be liable for an act or
omission of such person in carrying out such responsibility…”
DOL Reg. Section 2509.75-8 reiterates the wording of the statute by saying one may
delegate fiduciary responsibilities and that the person doing the delegating “…will not
be liable for acts and omissions of a person…” to whom responsibilities have been
delegated.
In both of these references the point is made that the exception to the “shall not be liable” rule
is a) you still have to prudently select and monitor your subordinate fiduciaries, and b) you must
avoid co-fiduciary liability (again, not hard). However, there is a night and day difference
between retaining responsibility for a difficult task versus retaining responsibility for hiring
someone qualified to handle this task.
No. 6: The “dead trustee problem” (continuity in fiduciary
appointments) goes away
A friend who owns a third party administration (“TPA”) firm had a sad but interesting story to tell.
One of his clients sold his company on an installment payment basis only to have the buyer turn
out to be a crook: he sold the assets and fled with the money and never made a single
installment payment. To add insult to injury, the buyer never sent payroll deferral contributions to
the 401(k) plan, and because the former owner had forgotten to remove himself as trustee, he
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com
ended up having to make up those missed contributions from his own pocket even though he
literally lost everything.
It’s a sad, and admittedly extreme, story, but one of the consequences was that my friend did a
sampling of his other clients to see if their trustee appointments were up to date. He found that in
one third of his clients’ plans the trustee named in the document no longer worked for the
company, and in one case the trustee was dead.
A MEP is not unique in solving this potential “dead trustee” problem (i.e., continuity and proper
appointment of fiduciaries), because any plan that outsources to institutional fiduciaries solves
the problem—as though in point of fact very few plans today outsource since, until now, such
options were not widely available. In any MEP this is a problem that goes away for each
adopting employer.
No. 7: Fewer headaches
First, let’s define as a headache any fairly significant problem with your retirement plan that
forces you to make a correction. Corrections fall under one of several IRS or DOL programs and
can be both expensive and time-consuming, and are surprisingly common—problems and
corrections happen all the time, and there are plenty of statistics published by the government
every year for those who are interested. (See “Statistics and Surprises” for a snapshot.) In many
years, most employers have none of these significant headaches, but anyone who has talked to
an employer with a headache knows that, when one comes, it can be extremely problematic.
In a MEP operated by a professional fiduciary (not all MEPs are, so beware), one entire class of
headaches—those caused by incorrect administration—goes away because such errors are no
longer the adopting employer’s responsibility. Another class of headaches—errors caused by the
employer’s failure to provide correct and timely data about its employees—does not go away.
A MEP cannot eliminate all headaches but it eliminates one broad category of headaches.
No. 8: The education burden is dramatically reduced
The CFO of a 250 person company retired and left behind a successor CFO who knew little
about running a retirement plan and nothing about this particular company’s plan. Her
memorable comment to me was, “I don’t even know what it is I don’t know, and honestly I
don’t want to have to know what I don’t know.” Hiring a professional fiduciary means not having
to even know what needs to be done. A more rudimentary level of knowledge suffices when
one supervises a fiduciary compared to when one is the fiduciary.
Consider an example like loans: improper loan handling is one of the IRS’s most common VCP
filings, and an employer need not know much but “not much” includes:
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com

Reading the plan document to familiarize yourself with what the plan permits

Learning or creating the procedure for handling loans

A variety of chores that different vendors handle differently—approving the loan,
entering the contributions, notifying the vendor of changes in the payments, directing
the vendor to make a deemed distribution if appropriate.
This burden, by itself, is not big deal. But add the knowledge required about loans to the
knowledge required about SPDs, SMMs, QDROs, hardship distributions, in service distributions,
SARs, what has to be mailed to whom when, and other minor chores, and the knowledge
burden adds up to a big deal.
No. 9: A fundamental disconnect is eliminated (vendors who do work
but are not responsible for the results)
In most plans today, employers are responsible for most fiduciary tasks, and most vendors are
not fiduciaries at all or accept only a narrow range of fiduciary responsibility. This state of affairs
leads to a fundamental disconnect: employers lean on their vendors for expertise but remain
responsible under ERISA for many vendor failures.
Take the example of loans above: errors with respect to loans are quite common (Number 4 on
the IRS’s list of most common Voluntary Correction Program filings). Payment schedules are often
out of sync by one or more payment periods; loan authorizations fail to get signed; 1099s never
get sent for deemed distributions; companies allow repayments after termination when they
shouldn’t, or fail to allow them when they should. What happens when loans go bad is that the
employer is left with the responsibility and has to bear the labor and direct cost of a correction—
the vendor virtually never pays. Yet only the vendor has the expertise to ensure that the loans
are done right in the first place. This is the disconnect.
The best way to reduce the burden of knowledge, process, execution, and documentation that
is the lot of every fiduciary is simple: don’t be the fiduciary. If you don’t like the work that goes
with being the administrator, don’t be the administrator.
Note that “administrator” refers to the fiduciary identified as such in the plan document,
sometimes called the “ERISA Section 3(16) administrator, to distinguish it from a third party
administrator or TPA, which is generally not a fiduciary. There is a big difference between helping
a fiduciary complete a task and being a fiduciary when the fiduciary bears the brunt of the
consequence of failure including, accepting legal responsibility for the task. To use a simple
analogy, would you rather hire someone to apply a patch to your roof or would you rather hire
someone willing to be responsible for correctly fixing the leak?
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com
No. 10: MEPs allow employers to work within a community
MEPs do not need to be huge to be successful, and Pentegra’s experience is that people care
about helping and being helped by people in their community. The “community” could be
geographic, but it could also be based on a given profession with or without a certain
geographical footprint; it could be clients of a particular advisor or insurance agent; and it
could be members of the same association or chamber of commerce.
Conclusion: Saving Time, Money, Headaches, and Risk
MEPs are not a panacea but they do a good job of pooling assets and labor to achieve
economies of scale and reduce costs. They offer a level of fiduciary outsourcing and risk
reduction that is tough to duplicate. Adopting employers can reasonably expect to spend less
time on the plan and encounter fewer headaches. Taken as a whole, MEPs offer powerful
benefits and do so with a sense of community.
Pete Swisher, CFP®, CPC, QPA, TGPC, is the author of 401(k) Fiduciary Governance: An Advisor’s
Guide, currently in its third edition, and serves as Senior Vice President of Pentegra Retirement
Services. He can be reached at pswisher@pentegera.com.
2 Enterprise Drive, Suite 408 Shelton, CT 06484-4694 800•872•3473 tel 203•925•0674 fax www.pentegra.com