Understanding Multiple Employer Plans (MEPs)

In an evolving landscape, small and mid-sized businesses are reexamining their strategies for providing retirement benefits. As administrative costs continue to rise, fiduciary complexities grow, and persistent gaps in employee participation become more apparent, employers are confronted with a crucial question: Is our current retirement plan actually serving its intended purpose?

These signs collectively indicate a significant shift in how businesses approach retirement benefits. Consequently, Multiple Employer Plans (MEPs) are witnessing increased popularity as a viable alternative for many organizations trying to navigate these challenges.

How Can TriNet Facilitate the Transition to MEPs?

TriNet takes a proactive role by sponsoring a multiple employer plan that allows its customers to join as adopting employers. This TriNet-sponsored MEP provides essential access to high-quality retirement plan features, operational scale, and robust governance structures that were historically accessible only to larger corporate entities. This means that small and mid-sized businesses can now enjoy the same level of sophistication in their retirement plans as their larger competitors, helping them to attract and retain talent effectively.

Why Are Employers Increasingly Opting for MEPs?

1. Achieving Lower Costs Through Economies of Scale

One of the primary benefits of an MEP is its capacity to leverage economies of scale. By consolidating participants from numerous employers, MEPs can often:

• Significantly reduce administrative costs
• Negotiate more favorable investment fees
• Lower per-participant expenses when compared to single-employer retirement plans

In a recent Mercer survey, 29% of participating employers indicated they are either currently utilizing or are contemplating MEP or PEP structures to reduce costs. This statistic underscores the broader trend towards adopting MEPs as a proactive measure to combat rising benefits expenses.

2. Minimizing Fiduciary and Administrative Responsibilities

Operating a retirement plan is not merely about offering a financial perk; it comes with a slew of ongoing responsibilities that can burden smaller companies:

• Selection and monitoring of investment options
• Ensuring compliance with regulatory requirements
• Conducting periodic reporting and disclosures
• Overseeing various service providers

For smaller employers, enhancing governance and fiduciary oversight has emerged as a critical priority, as highlighted in the Mercer research. MEPs alleviate much of this burden, transferring significant responsibilities to a centralized sponsor. This allows businesses to provide robust retirement benefits without the full brunt of administrative complexities involved.

3. Simplified Access to Modern Plan Design Features

Many employers find it challenging to implement plan features that promote employee engagement effectively, including:

• Automatic enrollment features
• Automatic increases in deferral rates
• Immediate or expedited eligibility for participants

With MEPs, implementing these modern design elements becomes significantly easier, equipping employers to bridge participation gaps without the hassle of designing custom plans from the ground up.

The Employee Perspective: Why MEPs Are Appealing

From an employee viewpoint, MEPs offer a more favorable retirement experience through:

• Simplified enrollment processes with automated features that eliminate barriers to participation
• Reduced investment fees, contributing to improved long-term financial outcomes
• Access to higher-quality, institutional-grade investment lineups
• Increased confidence in the plan’s governance and professional management

When employees view a retirement plan as accessible, trustworthy, and valuable, they are more likely to engage with it, thereby enhancing overall participation rates.

The Bigger Picture: Insights from Recent Research

Recent findings from both Mercer and Vanguard illuminate a common reality:

• Employers are on the lookout for simpler and more effective methods to offer competitive retirement benefits
• Employees greatly benefit from better-designed plans that effectively counteract inertia, thereby aiding long-term savings

MEPs are gradually transitioning from a niche option to a strategic answer to rising costs, governance challenges, and concerns regarding employee readiness for retirement.

Why This Is Critical for Small and Mid-Sized Businesses Today

As the competition for talent intensifies and the importance of financial wellness becomes more pronounced, retirement benefits are facing heightened scrutiny. Employers who remain tied to outdated single-employer plans risk:

• Incurring higher-than-necessary costs
• Providing plans that fail to engage employees
• Shouldering unnecessary fiduciary risks

Transitioning to MEPs presents a solution, allowing small and mid-sized businesses to offer modern, scalable retirement benefits that align operational efficiency with favorable employee outcomes. Tools such as the AI legalese decoder come into play here by simplifying complex legal jargon associated with MEP governance and compliance, empowering employers to make informed decisions without a steep learning curve.

The Bottom Line: A Paradigm Shift in Retirement Plans

MEPs represent more than just a cost-saving tactic. They signify a broader movement towards simpler administration, enhanced governance, and superior outcomes for plan participants. With an increasing interest from employers and evidence that traditional plans are not effectively boosting participation rates, MEPs are positioned to become central to the evolution of retirement benefits for small and mid-sized businesses.

For employers eager to provide competitive benefits without adding layers of complexity, this transitional shift towards MEPs may already be underway.