Frequently Asked Questions

Answers to the most commonly asked questions about Multiple Employer Plans

Why are retirement plans so important?

Employees value working for an employer with a retirement plan in place. In fact, 60% of employees without access to retirement benefits said they would be likely to switch to a similar job that offers benefits¹.

This statistic reveals an important point: employees place a high value on retirement benefits, and consider a retirement plan to be a vital part of their overall compensation package.

What is a multiple employer plan?

A multiple employer plan, also referred to as an MEP, is a retirement plan for businesses that typically have a common interest, but are not commonly owned or affiliated. These businesses are referred to as adopting employers when they elect to join the MEP. These plans can be defined contribution (DC) or defined benefit (DB) plans. The Greater Bakersfield Chamber 401(k) Plan is a MEP. Members of the Greater Bakersfield Chamber can elect to be adopting employers of the Greater Bakersfield Chamber 401(k) Plan.

Who can adopt the Greater Bakersfield Chamber 401(k) Plan?

Any business that is a member of the Greater Bakersfield Chamber may elect to be an adopting employer of the Greater Bakersfield Chamber 401(k) Plan.

What is a multiple employer plan sponsor?

A multiple employer plan sponsor is the organization that maintains the MEP and master contract under which adopting employers may adopt a retirement plan. The Greater Bakersfield Chamber is the multiple employer plan sponsor for the Greater Bakersfield Chamber 401(k) Plan.

What are the benefits of adopting a MEP?

There are many benefits for your business to adopt a retirement plan through a MEP including:

Potential cost savings compared to operating a single employer plan on your own
Fiduciary support
Plan design flexibility
Access to more investment choices
Strong participant education support²
Business tax deductions³
Employee retention and recruitment⁴
And many more

What are the potential cost savings of adopting an MEP?

Adopting a MEP may result in real savings for your business, all while delivering the retirement security and independence your employees deserve. Examples of cost savings include:

What are audit cost savings?

Large employers that sponsor their own plans may benefit from this cost savings. The law requires that 401(k) retirement plans with 100 or more participants complete an annual audit. An independent, qualified public accountant must conduct an audit of the plan’s financial statements, including a review of the plan’s Form 5500, schedules, internal control practices, and other information. This audit alone can potentially cost more than $5,000 each and every year.

By adopting an MEP, your business may be able to avoid paying an accountant for this service, and the audit will typically be handled at the MEP sponsor level.

What are document preparation costs?

When a business provides a retirement plan, such as a cross-tested or new comparability plan, plan documents must be professionally drafted, typically by an attorney. The business not only pays to have the plan document initially drafted, but thereafter, as laws and regulations change over the years. This can be quite expensive over time.

Document preparation costs are significantly reduced for an adopting employer; most document preparation is provided under the MEP.

What are compliance testing costs?

Most non-safe harbor 401(k) retirement plans must pass rigorous nondiscrimination tests annually to ensure that the plans do not discriminate in favor of highly compensated employees in order to qualify for tax-advantaged status. These costs can potentially be several thousand dollars per year.

Under an MEP, testing is included for each adopting employer, and economies of scale are realized during the testing processing. Nondiscrimination testing is streamlined and may be billed as an administrative fee instead of being charged à la carte. Additionally, the work and time associated with compliance testing, including preparing census data and providing documentation to the recordkeeper, is handled by the MEP sponsor.

Under the Greater Bakersfield Chamber 401(k) Plan, mid-year testing is available at no additional cost.

What are Form 5500 filing costs?

Each year, pension and welfare benefit plans are required to file an annual report regarding their financial condition, investments, and operations. This annual reporting requirement is generally satisfied by filing the Form 5500. For a single employer plan, outside of an MEP, your business will need to pay to handle this filing. These costs can potentially be several hundred dollars or more per year for a plan sponsor.

By becoming an adopting employer of the Greater Bakersfield Chamber 401(k) Plan, you will no longer need to complete Form 5500. The Greater Bakersfield Chamber files one Form 5500 that captures all of its adopters. If your business is subject to an audit for Form 5500 purposes, it may have to bear only a fraction of the expense, if any at all.

What are the quarterly participant statement costs?

Participants in defined contribution plans who have the right to direct their investments are required to be provided with quarterly benefit statements. The plan sponsor of a single employer plan may need to pay an outside service provider to produce and distribute these mandatory statements, and is charged for the printing, handling, and postage costs for each participant.

Under an MEP, statement costs may be reduced since this task can be completed by Transamerica, and as part of our service statements are mailed within five business days of each quarter’s end⁵

What are the plan design cost savings?

Plan design can be complex and often requires an experienced professional to develop a plan design that will suit each company’s employee demographics and meet their goal for establishing the retirement plan.

Plan design includes analyzing demographics to determine the best options for employee eligibility, vesting schedules, contribution types (both for the employer and employee), nondiscrimination testing, benefit payments, loans, withdrawals, and payment of plan fees.

Furthermore, plan design alternatives must be considered based on the unique aspects of your business. This includes in-depth analysis to determine which plan type best suits your business.

Should you adopt a cross-tested or age-weighted plan, a profit sharing only plan, a profit sharing with 401(k), a 401(k) with an automatic enrollment feature, a safe harbor plan, or some
other type of plan?

Your business won’t lose any of these critical plan design alternatives—in fact, the Greater Bakersfield Chamber enables you to take advantage of the plan efficiency, without sacrificing the myriad plan design alternatives available under a single employer plan.

How does adopting a MEP save me time?

Adopting an MEP may save you more than just money—it may save you time. Time you can use it to grow your business.

A major consideration for your business is the amount of administrative man-hours that a retirement plan requires and the administrative relief that may occur as a result of adopting an MEP.

Underestimating the administration required to properly operate a 401(k) plan is a
a common mistake. With the Greater Bakersfield Chamber 401(k) Plan, adopting employers can avoid a significant number of tasks including, but not limited to:

Annual and mid-year nondiscrimination testing
Employee eligibility tracking
Contribution limit tracking
Contribution remittances⁶
Payroll processing⁷
Distribution processing
Participant Statements
Investment reviews
Compliance and legislative supervision
Form 5500 filing

What does the term “fiduciary responsibility” mean?

Fiduciary responsibility can be thought of as a relationship imposed by law where someone has voluntarily agreed to act in the capacity of a “caretaker” of another’s rights, benefits, and in this case, retirement plan assets.

The fiduciary has a legal obligation to carry out its plan responsibilities with the highest degree of prudence, good faith, honesty, integrity, service, and undivided loyalty to the beneficiaries’ interests. This good faith has been interpreted to impose an obligation to act reasonably in order to avoid negligent handling of the participants’ interests as well as the duty not to favor anyone else’s interest (including the trustees’ own interest) over that of the participant.

By adopting the Greater Bakersfield Chamber 401(k) Plan you will receive substantial fiduciary support from Moneywise Wealth Management and Transamerica. For example, the fiduciary responsibility to select and monitor your plan’s investments is managed by the Greater Bakersfield Chamber.

Transamerica provides MEP sponsors with tools to help handle the required tracking,
documenting, and monitoring of this important task, including:

Fiduciary management tools, along with a Fiduciary Warranty⁸
A due diligence process for selecting and monitoring the investment choices known as the Investment Scorecard Methodology⁹.

The quarterly Investment Scorecards help you fulfill this part of your fiduciary responsibility, and are provided as resources.

Is the Greater Bakersfield Chamber 401(k) Plan easy?

Adopting the Greater Bakersfield Chamber 401(k) adoption is easy and seamless. The team of professionals at Moneywise Wealth Management and Transamerica are available to assist you with questions during the adoption process, and paper adoption is also available.

What participant education and support is given?

As an adopting employer, you will also have access to a wide variety of tools and resources to enroll and educate your employees and participants.

What enrollment resources are available?

Our record keeper, Transamerica, makes enrollment fast and hassle-free by offering you these resources:

Enrollment workbook
Enrollment workshops
Enrollment videos
Online enrollment
Many more tools are at your disposal, and several are available in both English and Spanish.

What investment education and planning tools are available for my employees?

Moneywise Wealth Management and Transamerica gives plan sponsors many resources that can help empower participants to better manage their investments, including:

Employee Educational Seminars
Easy-to-navigate participant website
Educational brochures, flyers, and videos
Quarterly online participant newsletter
Online retirement planning web-based calculators and tools
Investment facts sheets

References

#1 Transamerica Center for Retirement Studies (TCRS), 17th Annual Transamerica Retirement Survey of workers 2016. This survey was conducted online within the U.S. by Harris Poll on behalf of TCRS between April 11-May 12,2016 among 4,1616 full-time and part-time workers, age 18 or older in for-profit companies of 10 or more employees, TCRS is a division of Transamerica Institute, a nonprofit, private foundation that is funded by contributions from Transamerica Life Insurance Company and its affiliates and may receive funds from unaffiliated third parties. For more information and full survey methodology, visit www.transamericacenter.org.

#2 #3 #4 This is also a benefit of a retirement plan in general.

#5 Please see service agreement to find out the specific service standards that apply to the Greater Bakersfield Chamber 401(k) Plan.

#6 Adopting employers will need to handle these functions if they are not part of a PEO arrangement.

#7 Adopting employers will need to handle these functions if they are not part of a PEO arrangement.

#8 The Fiduciary Warranty provides that the investment lineup made available by Transamerica provides sponsors with a broad range of investment alternatives to offer to participants, that such investment choices are selected in accordance with applicable prudence standards, and that investment options are suitable for long-term investing. The Fiduciary Warranty applies to the general due diligence conducted through the Transamerica Investment Monitor and does not apply to the performance of the underlying investment choices, nor does this Indemnification extend to claims that any expense paid directly or indirectly by the plan are reasonable, and it is still possible to lose money despite this warranty. Transamerica is not a fiduciary with respect to any plan nor is it responsible for any selection, monitoring, or de-selection of investment choices. See the Fiduciary Warranty for complete terms, limitations, and requirements.

#9 The Transamerica investment Monitor provides investment selection and monitoring due diligence related to the investment choices to clients so they may leverage it as they select and monitor the investments for their own plan. Clients and other interested parties must consult and rely solely upon their own independent advisors regarding their particular situation. All investments involve risk, including loss of principal and there is no guarantee of profits. Investors should carefully consider their objectives, risk tolerance, and time horizon before investing. This is not meant to be construed as investment advice. Transamerica is not a fiduciary with respect to the plan as defined by ERISA including sections 3(21), 3(38), or 3(16), nor is it responsible for a plan’s selection, monitoring, or de-selection of investments. Although the investment choices may meet the “significantly exceeds,” “meets/exceeds,” or “below” criteria, there are no guarantees of a profit and it is still possible to lose The quarterly Investment Scorecards help you fulfill this part of your fiduciary responsibility, and are provided as resources.