Perhaps the best way to study up on MEP is to researcharticles that were written in the years before the concept became popular. (Photo: Shutterstock)
The SECURE Act is now a matter of law, and that matters to you.
The close of 2019 saw the passing of a new retirement law that may become just as significant as the 2006 Pension Protection Act (PPA). You may not remember what made the PPA so important, but without its QDIA provision, auto-enrollment, and push away from stable value funds, the gigantic target date fund industry might not have become so gigantic.
Will the 2019 SECURE Act contain a similar industry changer?
The broad answer is yes, although the specifics might be subject to debate since some aspects of the legislation won't be triggered until future plan years. One of those specifics—the open 401(k) MEP—has all the markings of the next retirement plan TDF. (To be fair, 401(k) MEPs may actually give TDFs a further boost.)
The open MEP differs from the closed MEP in that open MEPs can be created and marketed by firms with experience solely selling and servicing retirement plans. In contrast, closed MEPs could only be offered and promoted by business associations who must also offer and promote a full menu of benefits and services to their members.
We're probably a year away from seeing existing plans begin to transition to MEPs, but it makes sense for smaller companies to do so. It will save them time and money and lower their fiduciary liability.
But don't wait for this interest to arise before becoming an MEP expert. It may mean the difference between a dinosaur retirement plan business model and a vibrant and sustainable one.
What's the best way to study up on the MEP? To begin with, be forewarned. Over the next several months, the trade media will be inundated with articles on the subject. Some of them will be good; some of them will not. Perhaps a better way to begin is to research MEP articles that were written in the years before the concept became popular. These will help you identify the most experienced practitioners.
Likewise, look for trade associations that have long championed the MEP cause. They will have featured speakers on the topic at their annual conferences. Again, these speakers represent the veteran MEP professionals. Get their names and see where they will be speaking next.
Finally, there will be new venues in which you can immerse yourself in the MEP experience. The best will evolve from credible outlets. The worst will be fly-by-night ventures. Use a little common sense here, as due diligence can be less costly than wasting your time and money on opportunists.
With the SECURE Act, there's a very good chance the MEP will become the standard 401(k) solution for all but the largest businesses. But the real significance won't be the growth of these new retirement plan vehicles. It will be the sudden appearance and exponential growth of the cottage industry needed to support the 401(k) MEP.
You may find the MEP will spawn greater opportunities for you tomorrow than you can imagine today.
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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).
