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DOL Requests Information on Prohibited Transaction Concerns for PEPs and MEPs



Prohibited Transactions Involving Pooled Employer Plans Under the SECURE Act and Other Multiple Employer Plans, 85 Fed. Reg. 36880 (June 18, 2020)

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The DOL has issued a request for information to help it assess the need for prohibited transaction relief for pooled employer plans (PEPs) and multiple employer plans sponsored by employer groups or associations or professional employer organizations (MEPs). The DOL previously asked for information to help it identify conflicts of interest and assess the need for prohibited transaction relief when it issued its final regulations expanding access to MEPs (see our Checkpoint article), but that request did not specifically address PEPs, which were subsequently authorized by the Setting Every Community Up for Retirement Enhancement (SECURE) Act (see our Checkpoint article).

The DOL’s current request seeks information about the parties, business models, conflicts of interest, and prohibited transactions that might arise in connection with PEPs. And it requests similar information for MEPs. The unusually detailed request solicits responses to 14 questions, many of which have multiple parts. Topics include the types of entities that are likely to act as pooled plan providers, the business models those providers will use, anticipated conflicts of interest, fees and compensation, PEP and MEP investments, which employers will seek to use PEPs and MEPs, and the need for additional prohibited transaction relief. Respondents are also encouraged to raise any other relevant matters. Comments are due on or before July 20, 2020.

EBIA Comment: The SECURE Act was intended to significantly diminish the obstacles to creating multiple employer plans. The formation and operation of new PEPs and MEPs, however, could raise obstacles that are not adequately addressed by the existing prohibited transaction rules and exemptions. Interested parties will want to take advantage of this opportunity to identify where relief will be needed, and where existing relief should be adequate. For more information, see EBIA’s 401(k) Plans manual at Sections II.F.2 (“Multiple Employer Plan) and XXIV.L (“Prohibited Transactions”).

Contributing Editors: EBIA Staff.

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