The Retirement Enhancement and Savings Act of 2018 (aka RESA 2018) is a rarity in modern Washington – a proposed bi-partisan bill which generally enjoys support from both sides of the aisle. There are several changes to the retirement plan landscape included in the bill, but let’s just look at one to start – the changes to multiple employer plans (aka MEPs).
To explain, most large & mid-sized businesses in the US have a 401(k) retirement plan for their employees. However, some smaller companies have avoided creating a 401(k) plan because of the additional burden of fees, time, and fiduciary liability. To reduce this burden, multiple employer plans were created to allow several small businesses to join up and collectively create a 401(k) which shares the costs of plan creation and maintenance while providing retirement plan access for their employees. There was a catch: to create a MEP, the small businesses had to be in the same industry. So, there might be a MEP of bunch local car repair shops, another one for hair salons, and yet another one for local restaurants. The proposed bill, RESA 2018, removes this association requirement which should allow more diverse businesses to opt into a shared retirement plan and further lower administrative costs.
Last Friday, President Trump announced an executive order which shared several initiatives included in RESA 2018. For example, the executive order also allows unaffiliated, unassociated employers to pool resources to create a MEP. Other shared initiatives include a revamp of required minimum distributions and lowering paperwork requirements for retirement plans. We should note the executive order is not a law. Rather, it’s a resolution. It directs the Department of Labor to enact some of proposed changes. On the other hand, some of the proposed changes in the executive order may not require Congressional input to enact – an executive order may be enough. In either case, this order is the green, “go-ahead” signal which should increase the odds of RESA 2018 going to the top of the legislative docket stack and passing through Congress (relatively) quickly.