President Trump Issues Executive Order to Encourage Small Employers to Sponsor Retirement Plans | Practical Law

President Trump Issues Executive Order to Encourage Small Employers to Sponsor Retirement Plans | Practical Law

In an effort to expand retirement plan participation among employees of small and medium employers, on August 31, 2018, President Trump issued an executive order directing the Departments of Labor (DOL) and Treasury to consider proposing new regulations and guidance that would expand access to multiple employer plans (MEPs) and clarify MEP qualification requirements, reduce the cost of retirement plan notice requirements, and update the required minimum distribution (RMD) tables.

President Trump Issues Executive Order to Encourage Small Employers to Sponsor Retirement Plans

by Practical Law Employee Benefits & Executive Compensation
Published on 04 Sep 2018 • USA (National/Federal)
In an effort to expand retirement plan participation among employees of small and medium employers, on August 31, 2018, President Trump issued an executive order directing the Departments of Labor (DOL) and Treasury to consider proposing new regulations and guidance that would expand access to multiple employer plans (MEPs) and clarify MEP qualification requirements, reduce the cost of retirement plan notice requirements, and update the required minimum distribution (RMD) tables.
On August 31, 2018, President Trump signed an executive order directing the DOL and the Treasury Department to consider proposing new regulations and guidance that would:
  • Expand employer access to multiple employer plans (MEPs).
  • Clarify MEP qualification requirements.
  • Improve the effectiveness of and reduce the cost of retirement plan notice requirements.
  • Update the required minimum distribution (RMD) life expectancy and distribution period tables.
( (Aug. 31, 2018).)
The Trump Administration issued this executive order to try to give employees of small and medium businesses greater opportunity to participate in employer-sponsored retirement plans. The executive order observes that 23 percent of full-time employees in the private sector lack access to an employer-sponsored retirement plan, and only 53 percent of employees in businesses with fewer than 100 workers were offered a retirement plan.

Multiple Employer Plans

The executive order first discusses multiple employer plans, which are referred to as association retirement plans (ARPs) in a fact sheet the Administration issued concurrently with the order ( (Aug. 31, 2018)). The order directs the Secretary of Labor to examine policies that would:
  • Clarify and expand the circumstances when employers, especially small and mid-sized employers, may sponsor or adopt a MEP.
  • Allow part-time workers, sole proprietors, working owners, and other entrepreneurial workers with non-traditional employer-employee relationships to participate in workplace retirement plans.
Within 180 days of the date of the order, the Secretary of Labor shall consider:
  • Whether to issue proposed regulations, other guidance, or both, that would clarify when a group or association of employers or other appropriate business or organization could be considered an "employer" within the meaning of Section 3(5) of ERISA (29 U.S.C. § 1002(5)).
  • Proposing amendments to regulations or other guidance on when a MEP may satisfy the tax qualification requirements in the Internal Revenue Code (Code), including the consequences if one or more employers that sponsored or adopted the MEP fail to meet the qualification requirements. The order directs the Secretary of the Treasury to consult with the Secretary of Labor in advance of issuing the regulations or guidance.
The Administration's fact sheet states that MEPs reduce the cost of offering retirement plans for businesses that join together by expanding the number of workers who participate, but that current requirements present difficulties for small businesses that want to band together to offer MEPs. As discussed in an article on the executive order by DOL Secretary Acosta, the Administration views MEPs as plans that can leverage economies of scale, with fewer paperwork and administrative costs for small businesses, to give small business employees access to the same quality retirement plans as employees of larger businesses.
Secretary Acosta's public remarks at the signing of the executive order provide additional details on what the Administration envisions. He gave an example of small businesses in a particular city banding together to participate in a retirement plan administered by the city's chamber of commerce. The plan would provide portability for employees who go from one employer to another.

Notice Requirements

Under the executive order, the Secretary of Labor, in consultation with the Secretary of the Treasury, shall, within one year of the date of the order, complete a review of potential regulations and guidance to:
  • Make retirement plan disclosures required under ERISA and the Code more understandable and useful for plan participants and beneficiaries.
  • Reduce the costs and burdens the plan disclosure requirements impose on employers and other plan fiduciaries responsible for their production and distribution.
This review shall explore the potential for broader use of electronic delivery as a way to improve the effectiveness of disclosures and to reduce their associated costs and burdens. The Secretary of Labor, in consultation with the Secretary of the Treasury, shall consider issuing proposed regulations or guidance if deemed appropriate.
Practical Law has numerous resources explaining the notice requirements for defined contribution and defined benefit plans (see the Qualified Retirement Plan Notices Toolkit).

Required Minimum Distributions

Within 180 days of the executive order, the Secretary of the Treasury shall examine the life expectancy and distribution period tables in the required minimum distribution regulations to determine whether they should be updated to reflect current mortality data and whether such updates should be made annually or on another periodic basis (see Practice Note, Required Minimum Distributions from Retirement Plans).

Practical Implications

Small employers and their counsel should be especially attentive to any proposed regulations or other guidance that will flow from this executive order, which may make it easier for small businesses that are not part of a controlled group to join together to offer MEPs/ARPs (see Practice Note, Controlled Group and Affiliated Service Group Rules). That, in turn, may lead to greater retirement plan participation among employees of small businesses. The executive order's emphasis on making MEPs accessible to small employers, and its use of the term "Association Retirement Plans," mirrors the Administration's efforts to allow employees of small employers to participate in association health plans (see Practice Note, Association Health Plans).