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DOL Answers Trump Retirement Order with Another Set of Rules

By Rita Raagas De Ramos October 23, 2018

The Department of Labor announced Monday a proposed rule that’s intended to help strengthen retirement security for employees of small businesses.

The DOL says the proposed rule would make it easier for small businesses to offer retirement savings plans to their workers through so-called Association Retirement Plans, which would let small businesses band together to offer 401(k) plans to their employees.

The proposed rule comes less than two months after president Donald Trump issued an Executive Order on Strengthening Retirement Security in America.

Trump “is moving to expand quality, affordable workplace retirement plan options for America’s small businesses and their employees. Many small businesses would like to offer retirement benefits to their employees but are discouraged by the cost and complexity of running their own plans,” DOL secretary Alexander Acosta said in a statement announcing the proposed rules.

Alexander Acosta (Getty)

Acosta said the ARPs would “give these employers a simple and less burdensome way to offer valuable retirement benefits to their employees.”

Under the proposed rule, ARPs could be offered by associations of employers in a city, county, state, a multi-state metropolitan area or in a particular industry nationwide. Sole proprietors and their families would also be permitted to join such plans.

The ARPs could be sponsored through associations or Professional Employer Organizations. A PEO is a human-resource company that contractually assumes certain employment responsibilities for its client employers, according to the DOL.

The DOL says allowing those new plan arrangements would let small businesses offer benefit packages comparable to those offered by large employers. The DOL expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses’ hand when negotiating with financial institutions and other service providers.

As reported, Trump’s Executive Order directed the DOL to ease regulations around multiple-employer retirement plans and grant greater ease of access to small businesses. The order also called on the Treasury Department to review a longstanding rule forcing investors to withdraw taxable funds from their retirement accounts starting when they turn 70 1/2 years old. Lastly, the EO tasked regulators with examining the electronic distribution of disclosures and statements, as well as other documents.

In a previous interview, John Ellis, New Orleans, La.-based senior retirement plan consultant/financial advisor at UBS Financial Services, said multiple-employer retirement plans are a good idea.

“I believe that anything that allows plans to expand, particularly in that underserved market – smaller companies who don’t currently have a plan – if there was truly a simplification that came about as a result of additional legislation making it easier for smaller employers to set up 401k plans, to manage them, to file the required documentation to the IRS and the DOL, I think that’s a good thing,” he said.