The SECURE Act
On December 19, 2019, the Senate approved legislation (HR 1865) that included the Setting Every Community Up for Retirement Enhancement Act of 2019 (The SECURE Act). The SECURE Act creates a new provision within ERISA to allow companies to offer retirement benefits to unrelated small businesses through a pooled employer plan (PEP), which is a type of multiple employer plan (MEP) that uses a new entity called a “pooled plan provider.” The new law deems PEPs single employer ERISA plans and creates a new legal structure to govern such plans.
This new law includes almost thirty additional provisions aimed at encouraging the adoption of employer-sponsored plans and lifetime income options, altering plan distribution rules, easing administrative requirements, and improving certain types of defined benefit plans. A number of the provisions are effective with the new year (2020).
How the SECURE Act impacts PEOs
The SECURE Act makes two changes that impact PEO-sponsored retirement plans:
- One Bad Apple Relief: The SECURE Act would eliminate the “one bad apple” rule for MEPs maintained by employers that either (1) have a “common interest other than having adopted the plan,” or (2) use a pooled plan provider.
- Form 5500 Reporting: All MEPs – including PEO-sponsored retirement plans - would be required to include the following on Form 5500:
- A list of participating employers;
- A good faith estimate of the percentage of total contributions made by participating employers during the plan year;
- The aggregate account balances attributable to each employer in the plan; and
- Identifying information for the pooled plan provider, if the plan is a pooled employer plan.
While the bill expands the Form 5500 reporting requirements for all MEPs, it limits its application to MEP retirement plans, which means that MEP health plans (PEO-sponsored health insurance plans) would not be subject to these specific reporting requirements.
View a detailed summary of the SECURE Act to understand the provisions of the new law.