Obama Asks Congress for $100M Proposal on MEPs

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Sean Forbes

Feb. 9 — President Barack Obama is asking Congress for a $100 million legislative proposal that would expand access to retirement accounts and “sow the seeds” for future retirement models that would provide portable benefits coverage through innovations in multiple employer pension plans.

Legislation would expand coverage in two ways: through innovation grants to spur the provision of new multiple-employer benefit models and the creation of open multiple employer plans, according to the White House's proposed fiscal year 2017 budget for the Department of Labor. The budget was released Feb. 9.

The White House proposed raising the budget for the DOL Employee Benefits Security Administration from $181 million to about $206 million.

Traditional MEPs, which are co-sponsored only by employers with a common bond, such as rural electrical cooperatives, have been around for decades, but the DOL has historically taken a dim view of broadening the design to unrelated employers.

That is, until last November, when in response to a directive from the White House, the DOL released guidance to allow states to broaden the reach of MEPs to employers that don't have a nexus .

Employees who move from one employer to another in an open MEP, or independent contractors participating in a pooled plan using the open MEP design, could continue contributing to the same plan regardless of which employer they work for, the White House said in its budget document.

MEPs Legislative Interest

Several bills have been put forward in recent years that would expand the reach of MEPs to unrelated employers, most recently in January, when Sens. Susan Collins (R-Maine) and Bill Nelson (D-Fla.) reintroduced a bill (S. 266) that would allow unrelated small employers to band together to share the administrative burden of retirement plans .

Collins and Nelson's bill, the Retirement Security Act of 2016, would waive the requirement that there be a connection among unrelated businesses for them to form or join a MEP, but would apply only to businesses with fewer than 500 employees. It was reintroduced Jan. 27, and was originally introduced in 2014.

Rep. Ron Kind (D-Wis.), co-sponsor of the House companion legislation (H.R. 557) to S. 266, saw the request to fund the legislation as a good move. “A comfortable retirement is something everyone seeks to achieve—whether they work for a big business or a small business, and I am pleased to see that today the President has made it easier for small businesses to help their employees plan for retirement,” Rep. Kind told Bloomberg BNA Feb. 9 in an e-mail. “With this new measure, which I have pushed in the House for several years, the President is making good on his commitment in the State of the Union to help all Americans save for the future,” he said.

Rep. Vern Buchanan (R-Fla.), who co-sponsored H.R. 557, also praised the MEPs recommendation.

“Red tape should not be holding back Americans from being financially secure in their golden years,” Buchanan told Bloomberg BNA in an email.

“I applaud the President for recognizing the bipartisan support that open multiple employer plans (MEPs) enjoy. By reducing cost and complexity—two of the major barriers small businesses face when offering retirement benefits like 401(k) plans—this commonsense change will make it easier to give tens of millions of Americans the opportunity to save for retirement.”

Auto-IRAs and States

In the final budget request of his presidency, Obama also included a last attempt at establishing mandatory automatic-enrollment individual retirement accounts and tax credits to encourage small employers to start up retirement plans. While the MEPs legislation garnered praise, Congress has been less receptive to Obama's auto-IRA approach, having shot down these proposals in each of the previous proposed budgets he sent to the Hill.

Congress has rejected Obama's auto-IRA approach, but several states have run with some variation of the idea. The DOL gave those states—such as California, Illinois and Oregon—a boost when it released a proposed rule (RIN 1210-AB71) in November that would establish a new safe harbor from the Employee Retirement Income Security Act for state-sponsored programs involving auto-enrollment payroll deductions for IRAs.

To further encourage the states' efforts, the president slotted $6.5 million for a state-based retirement plan demonstration project, which would test new approaches to expanding retirement plan coverage. The funds would be made available through Sept. 30, 2018.

About half of the states have taken up various retirement initiatives for their private-sector workers. Their approaches include mandatory and nonmandatory payroll-deduction IRAs, and retirement plan marketplaces .

To contact the reporter on this story: Sean Forbes in Washington at sforbes@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

For More Information

Information on the proposed EBSA budget is available at http://src.bna.com/cwD.

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