Small employers would consider joining an Open MEP -- even if they already sponsor a plan

New research from Empower Retirement shows the majority of small business owners that do not currently sponsor a retirement plan would consider joining an Open Multiple Employer Plan.

A survey of 305 employers with five to 250 employees shows 66 percent of employers that don’t have a plan would consider joining an Open MEP within the next two years.

But the option would also be attractive to small employers that currently sponsor a plan. Of the employers surveyed by Empower, 85 percent already sponsor a plan; more than two-thirds of that cohort said they too would consider migrating to an Open MEP.

Under legislative proposals currently being considered in Congress, non-related, unaffiliated employers could pool employees under one defined contribution plan. A regulatory proposal being finalized by the Labor Department is more restrictive, limiting participation in MEPs to employers that share an affiliation, or are located in the same municipality or state.

According to Empower’s research, one-third of U.S. households are without access to a workplace retirement plan.

The difference in projected retirement preparedness between those that participate in a workplace plan and those that don’t is considerable. Empower’s data shows that those households with access to a plan are on track to replace 79 percent of their working income in retirement, compared to just 45 percent for those households that don’t have access to a plan.

Employers that do and don’t sponsor a plan both said the biggest advantage to doing so is that “it’s the right thing to do.” Employee retention and the ability to attract talented workers were the second and third most commonly cited benefits for sponsoring a plan.

For employers that do not sponsor a plan, cost is the biggest deterrent, according to Empower’s research. Nonetheless, those employers recognize the value of offering a plan for workers.

“While employer expense is a serious issue, many employers feel a strong desire to help boost their employees’ financial wellness and readiness for retirement,” the report says.

A key value-add to Open MEPs is that they create the economies of scale to reduce sponsors’ and participants’ costs compared to sponsoring a single plan.

“We support proposed legislation that would make open MEPs more accessible to small businesses and their employees,” said Ed Murphy, president of Empower Retirement, in a statement. “Congress has an opportunity to expand coverage to more working Americans. Open MEPs would be another tool for employers to access that helps workers on the path to retirement readiness and financial freedom.”

Empower’s survey compares the attitudes of the sponsors Who expressed interest in joining a MEP with those who did not. Interested employers were most attracted to the potentially lower costs of MEPs, while uninterested employers said oversight and fiduciary support from plan providers was their top concern.

Employers said they would be most likely to consider joining a MEP if a retirement plan provider administered it.

Under the Labor Department’s proposal, plan providers are prohibited from sponsoring MEPs. Proposals in Congress would allow service providers to sponsor MEPs.