As we move from an employer-centric retirement plan to an employee-centric retirement plan, the entire concept of retirement savings will evolve. (Photo: Shutterstock)
“Tomorrow when I wake or think I do, what shall I say of today? That with Estragon my friend, at this place, until the fall of night, I waited for Godot?”
So says Vladimir in Samuel Beckett's acclaimed existential masterpiece “Waiting for Godot.” Like Estragon and Vladimir, we have waited. In our case, we call Godot the 401(k) MEP.
The 401(k) MEP creates three significant opportunities for employers, employees and retirement plan service providers. Together, these opportunities will forever change the retirement plan industry.
Christopher Carosa, CTFA, is chief contributing editor for FiduciaryNews.com, a leading provider of essential news and information, blunt commentary and practical examples for ERISA / 401(k) fiduciaries, individual trustees and professional fiduciaries.
For employers, the 401(k) MEP alleviates a burden that has grown over time as the 401(k) benefit became more popular. Once Ted Benna showed us the way to the 401(k), the defined contribution plan became the standard. Employers retained primary responsibility for plan administration and execution, just like with defined benefit plans. The defined contribution plan itself became decentralized. With the promised safe harbors, this seemed like a good idea for employers. Employers viewed the retirement plan as nothing more than a sideline, a hobby.
It's since been learned this decentralization only increased fiduciary liability for the sponsoring company. To alleviate this, employers have had to devote more time and resources to cover this liability, time and resources that would otherwise be devoted to running the business. The hobby was becoming the tail that wagged the dog.
The 401(k) MEP permits employers to turn over the keys to a qualified expert. And with those keys goes most—if not all—of the inherent fiduciary liability. That helps the employer, the employee and the customers.
The 401(k) MEP offers employees something more than merely being in a position to reap the benefits of working for a more profitable employer. The employee will no longer have to rely on a part-time, non-expert plan sponsor (the employer) to administer their retirement savings. Their retirement will now be overseen by experienced experts whose only job is to make sure they have the best retirement plan possible. Also, 401(k) MEPs can produce economies of scale that reduce the plan costs.
As we move from an employer-centric retirement plan to an employee-centric retirement plan, the entire concept of retirement savings will evolve. With the 401(k) MEP, if you like your retirement plan, you can keep it—even when you change employers.
This is the real game-changer that comes with the 401(k) MEP. In the future, retirement plans can become individual, rather than corporate. As an employee, your retirement savings vehicle will be “plug-compatible” with whichever employer you happen to be working for.
In a gig-based economy where millennials job hop every few years, this means retirement saving will become easier, cheaper and more reliable.
Need to brush up on MEPs? Browse our library:
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
