The Department of Labor (DOL) has opined that a large 401(k) plan covering over 9,800 employees of 500 different employers is not a single retirement plan, but rather is a collection of separate plans established by each participating employer.
The plan was set up as a "multiple employer plan" and referred to as an "open MEP" because the employers adopting the arrangement were not related to each other by ownership, industry, or any other unifying factor. The DOL concluded this lack of "genuine organizational relationship" among the employers was fatal to the intended treatment of the plan as a single plan.
Although this opinion does not impair the tax-qualified status of open MEPs, it does mean that employers participating in open MEPs will be required to separately comply with the standards imposed under ERISA, such as the plan document, summary plan description, and Form 5500 requirements. In addition, each employer is treated as a fiduciary under ERISA and is charged with, among other things, prudently selecting and monitoring investment and service providers, including the sponsor of the open MEP and its affiliated service providers.
In light of this opinion, employers considering an open MEP should carefully evaluate the extent to which participation in the plan will, in fact, relieve it of responsibilities it otherwise has as an employer offering retirement benefits to its employees.