The feasibility of embracing “portable benefits” for contingent workers as a way of enhancing their ability to save for retirement is getting the attention of members of Congress from both sides of the aisle.
Many small businesses don't offer retirement plans because of the costs, complexities and concerns about fiduciary liabilities, witnesses said at a June 21 hearing held by the Senate Health, Education, Labor, and Pensions Subcommittee on Primary Health and Retirement Security.
Loosening the requirements on Multiemployer Employer Plans is something that Republicans and Democrats seem to agree would encourage more small businesses to offer plans, giving more employees the ability to save for retirement.
A MEP is a qualified retirement plan maintained by more than one employer. Unlike a multiemployer plan, a MEP isn’t collectively bargained.
Under current law, employers must have a common nexus—such as being in the same industry—to be a MEP. Many of the policy proposals floated in recent years have called for eliminating the nexus requirement in order to encourage the creation of “open MEPs.”
Open MEPs covering unrelated employers would be allowed under a bill introduced in Congress, the Retirement Security Act of 2015 (S. 266).
Another MEP regulation that has been mentioned as one that needs to be eliminated to facilitate portable benefits is the “one bad apple” rule. Under this rule, if one employer in a MEP violates tax qualification rules, the entire plan is disqualified.
Momentum is building to change both of these rules. Last fall, the Department of Labor issued guidance that would pave the way for states to sponsor open MEPs as a way of expanding private-employer retirement savings.
The Portable Model
The portable model would allow employers to pay into a benefits pool on a flexible, pro rata basis and give workers the ability to take those benefits with them when they change jobs. Also, part-time employees, who simultaneously work for more than one employer, could accrue benefits from each of them.
Worker advocates say the portable concept could also extend to a wide variety of independent contractors in more traditional jobs. Contractors typically aren't eligible for tax withholdings, unemployment insurance and minimum wage protections and aren't offered health-care and retirement benefits.
A variety of questions remain about what a portable benefits system might look like, including who would administer it, what types of workers would be eligible and what benefits might be included.
See related story, Portable Benefits Proposals Gaining Steam in Congress.
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