Small employers often find it daunting to offer “big company” qualified retirement plans. Small employers want to satisfy their long-term employees’ wishes to provide their families with a secure financial future, but they’re limited to certain types of qualified retirement plans.
A Simplified Employee Pension (SEP) IRA is easy to offer; however, this plan doesn’t have the control and flexibility of the 401(k) Profit Sharing plans offered by larger employers. Vesting and account accumulation benefits give corporate retirement plans a significant advantage over contributions into Individual Retirement Accounts (IRA).
For small employers, the cost for contracting the services required to comply with the numerous 401(k) compliance regulations is prohibitive. A secure retirement plan should offer the small employer accurate and timely administration, record keeping, fiduciary guarantee and a broad choice of investment options including no-load funds.
Employers who assume any of these responsibilities accept the potential liabilities. A Multiple Employer Aggregation Program (MEAP) allows small employers to team up to tackle the high costs associated with the more complicated services necessary for a properly run corporate retirement plan.
MEAP plans allow small employers to be sponsored by their association, payroll vendor or other similar benefit provider. This relieves them of significant liabilities as they delegate the duties of plan sponsor, plan administrator 3(16) and plan financial fiduciary 3(38) to professional third parties.
By joining a sponsored plan, small employers enjoy the economies of scale created by shared overseer costs and combined account volumes while maintaining a distinct protected plan for their employees. MEAP plans are most effective when used by employers starting new plans or sponsoring existing plans with less than $10 million in assets.