The rule makes it easier for small businesses to offer retirement savings plans to their workers through Association Retirement Plans (ARPs), which would allow small businesses to band together to offer retirement plans to their employees.
“Less than a year ago, President Donald J. Trump signed an Executive Order focused on expanding quality, affordable workplace retirement plan options for America’s small businesses and their employees,” Acting Secretary of Labor Patrick Pizzella said. “Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans. Association Retirement Plans offer valuable retirement security to small businesses’ employees through their retirement years.”
Enhancing workplace retirement savings is critical to the financial security of America’s workers. Approximately 38 million private-sector employees in the United States do not have access to a retirement savings plan through their employers.
Under the rule, ARPs could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide. In addition to association sponsors, the plans could also be sponsored through Professional Employer Organizations (PEO). A PEO is a human-resource company that contractually assumes certain employment responsibilities for its client employers.
By expressly permitting these new plan arrangements, the rule enables small businesses to offer benefit packages comparable to those offered by large employers. The Department expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses’ hand when negotiating with financial institutions and other service providers. The final rule effective date is September 30, 2019.
In August 2018, President Donald J. Trump issued Executive Order 13847, “Strengthening Retirement Security in America.” The Executive Order called for the Secretary of Labor to clarify and expand the circumstances under which U.S. employers, especially small- and mid-sized businesses, may sponsor or adopt an ARP or Multiple Employer Plan as a workplace retirement option for their employees. The Department used its delegated authority under the Employee Retirement Income Security Act of 1974 in developing the rule.
The Department of Labor’s mission is to foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the U.S.; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.