You would love to offer your employees a retirement plan, but you don’t know if you can. Meanwhile, you may have to offer a plan or join a state-run plan soon, assuming Congress doesn’t eliminate state-run retirement plans. It’s time to look into a multiple employer plan, or MEP retirement plan.
What if you could offer your employees the retirement plan you want (a better plan than the state one) and avoid the uncertainty surrounding state-run plans altogether? You can, through an MEP retirement plan.
1—Act Like a Big Corporation
As you know, it can be hard for businesses to offer retirement plans to employees. A lot of you don’t have the money for one or the time and resources to administer one. And if you do, your plan might not be as good as you would like.
You are not alone. Only about half of small businesses offer retirement plans to their employees. Meanwhile, almost all large corporations do.
In truth, you are at a disadvantage to large companies when it comes to retirement plans. This, in turn, puts you at a disadvantage when you are trying to attract the best talent. However, an MEP retirement plan lets you act like a large corporation and wipe out that competitive disadvantage.
Have you ever been at Costco or Sam’s Club and thought to yourself: “That’s a lot of paper towels. Where will I put them?”
You know you should get them because buying in bulk is cheaper. A roll from the gas station convenience store, for example, will cost you three dollars—meanwhile, these are a dollar each.
Economies of scale make retirement plans less expensive the more employees you have. Big corporations already know this. When they have 20,000 employees, they are effectively shopping at Costco. They have leverage for better plans from better providers for less money per employee.
When you have 20 employees, you are effectively shopping at the gas station convenience store. And you are paying up to four times as much as large corporations pay. But if you pool your resources with other companies, you can shop at Costco too.
Not only that, but your administration costs are next to nothing. What are 20 more employees when your co-employer provider is already managing 20,000? Again, you are taking advantage of economies of scale like a big corporation.
3—Save Time and Resources
Time and resources are huge reasons why many companies don’t offer retirement plans for their employees.
No matter how good it would be for your employees and how much you want to offer one, you only have so much energy and time in the day.
To administer a retirement plan, you or someone in your company has to shop for plans, negotiate with providers and then manage the plan. It’s a lot of work, and it’s time you could spend growing your business rather than haggling with providers.
And again, the administration costs with an MEP retirement plan are far lower than when you are administering a plan yourself.
Assuming you can find a decent retirement plan you can afford, should you administer it in-house? The short answer is no—it may not be in your best interest, your company’s best interest or your employees’ best interest.
With any benefits offering, there are risks involved as well as money. It makes more sense to have specialists handle this for you.
For one, you lessen your risk. If you make a mistake, omit something or otherwise mismanage the plan, you could be personally liable under ERISA. If you have an expert do it for you, you mitigate that risk significantly.
For another, you and your employees could get higher investment returns. Someone who negotiates retirement plans for a living has a better chance of negotiating a good plan at a low cost from a high-quality provider.
5—Escape the State-Plan Uncertainty
States are starting to offer their own retirement plans. Yet there’s uncertainty surrounding these plans at the moment.
A few states—California, Connecticut, Illinois, Maryland and Oregon—have passed laws creating their own retirement plans. The laws say that employers have to either offer retirement plans on their own or join the state plans.
Other states are lining up to pass similar laws. However, some members of Congress are against the new laws and may overrule them.
If it hasn’t already, your state may pass a law requiring you to offer a retirement plan or join the state plan. In that case, you will have a lot of work to do to get ready. And you may put in that work only to have Congress eliminate your state’s plan.
At the moment, there’s no way to know how what will happen. A much safer bet is to avoid the uncertainty altogether with a multiple employer plan. Whatever happens with the state-run plans, you can cover your employees and yourself.
An MEP Retirement Plan Is Your Best Option
Maybe you don’t have the money or resources to offer your employees a retirement plan. But maybe you want to or you live in a state that says you have to or soon will (depending on what Congress does).
No matter what, you don’t have to go it alone or count on your state for help. Multiple employer plans are already here, and they are your best option anyway. With an MEP retirement plan, you get more affordable, better choices, and you get away from the state-plan uncertainty.
Please Call Us With Questions
There are lots of moving parts with this, and you may have questions. Please give us a call. We have HR and retirement experts here who can go over all of your options with you, including our own MEP retirement plan.
The Avitus Group MEP 401(k), with over 160 employers, has many advantages over the ones states are currently putting forward. And with the Avitus Group MEP 401(k), we take care of everything from maintaining the plan document to filing form 5500 to compliance to deferral contributions to dealing with employee changes.