Proposed Rule Helps Small Businesses Offer Retirement Plans to Stay Competitive

October 31, 2018
Inside HR
Employee & Labor Relations

On October 22, 2018, the U.S. Department of Labor (DOL) announced a Notice of Proposed Rulemaking to help small businesses strengthen retirement security for American workers. The proposed rule would make it easier for small businesses to offer retirement savings plans to their workers through Association Retirement Plans (ARPs), which would allow small businesses to band together to offer 401(k) plans to their employees.

Under the proposal, ARPs could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide. Sole proprietors, as well as their families, would also be permitted to join such plans. In addition to association sponsors, the plans could also be sponsored through Professional Employer Organizations. A PEO is a human-resource company that contractually assumes certain employment responsibilities for its client employers.

Key Takeaway
According to the DOL, nearly 38 million private-sector workers are not offered employer-based retirement plans. The rule is a result of President Trump’s August 2018, Executive Order "Strengthening Retirement Security in America" instructing the DOL to look into the plan. Business groups have welcomed the proposed rule.

"This proposal will expand retirement savings opportunities for millions of small business employees," said Aliya Wong, who heads up retirement issues at the U.S. Chamber of Commerce. The rule, Wong added, would help small businesses compete with larger employers in offering benefits. The rule, if approved following a comment period, would pave the way for business associations to operate ARPs, allowing a group of businesses to share administrative and oversight costs.

Source: Michael Hyatt, Director, HR Government Affairs Director, MRA – The Management Association;