Under the Radar: Employee Benefit Developments in 2020; And, believe it or not, they're not COVID-related.

• Date: 01 November 2020
• Author: Nedrow, Elizabeth

The story of the year has been the coronavirus. COVID-19 has dominated news headlines, social media, and virtually every aspect of our lives. The virus has likewise dominated legal and tax news. Lawmakers and agencies have enacted multiple pieces of legislation and other guidance to help employers navigate the changes COVID-19 has wrought in the workplace. Those new laws and rules have rightly been the focus of our attention. But at some point before the end of 2020, it's worthwhile to look at the other legal developments that have flown under the radar this year. Here's a roundup.

PEPs

For many smaller employers, maintaining a retirement plan is a significant burden. They struggle to keep up with record-keeping, disclosure, and fiduciary obligations. And those obligations are only increasing. To be sure, there are many experienced and expert third-party administrators who will help employers navigate the requirements. But for years, the Internal Revenue Service and the Department of Labor have held the employer itself responsible for any compliance mistakes. Employers have clamored for relief from this situation, asking for an effective way to offload the responsibility on someone with more expertise. At the same time, advocates have argued for a platform for smaller employers to pool their purchasing power to negotiate for lower fees. Congress addressed these concerns when it amended ERISA and the Internal Revenue Code to include the concept of a "pooled employer plan," or PEP.

PEPs were created as part of the SECURE Act passed in December 2019. The concept is that employers who have no common interest or ownership can join together to provide a multiple-employer plan. Multiple-employer plans have always been permitted but have offered little relief or benefit to employers due to what is referred to as the "unified plan rule" or, more descriptively, the "one bad apple" problem: if one employer in a multiple-employer plan has an operational error, it risks the disqualification of the entire plan.

In the SECURE Act, Congress set out a platform where unrelated employers can avoid the "one bad apple" rule if they maintain a PEP. To qualify, a PEP must designate a "pooled plan provider" (a PPP, because who doesn't need more acronyms?) as a named fiduciary and plan administrator. In August 2020, the DOL proposed regulations that move the concept of a PEP closer to fruition (apple pun intended).

Under the proposed regulations, a PPP must register with the DOL and the IRS at least thirty but no more than ninety days before beginning operations (that is, before it begins publicly marketing a PEP). This initial filing will require disclosure of the PPP's structure, affiliates, marketing activities, services to be offered, and any pending legal or regulatory proceedings. In addition, the filing must disclose the PPP's chief compliance officers name and contact information.

The proposed regulations specify that once a PPP has a PEP lined up and ready to go, another filing is required. The PPP must submit a supplemental filing listing the PEP's name, trust identification information, and plan employer identification number (EIN). This filing will be accomplished through a new EBSA Form PR (Pooled Plan Provider Registration) and handled through the same system used to file Form 5500s. Notably, this will mean that the PPP's information will be publicly available on the DOL's website.

The SECURE Act authorized PEPs to begin operations as soon as January 1, 2021, so we can expect this market to develop quickly. Employers looking to offload a significant portion of their plan administrative burden--and potentially save costs at the same time--should reach out to their advisors and see what opportunities exist.

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