By enacting the long-awaited SECURE Act, a bipartisan Congress and the President have finally and formally acknowledged the ability of unrelated employers to come together and enjoy the benefits associated with participation in a common 401(k) plan.  The advantages of multiple employer plan participation include delegation of plan administration and related fiduciary responsibility and the ability to rely on third party professionals to select investment options.  The end result makes it easier for small businesses to offer their employees a higher quality plan that can take advantage of economies of scale on the same basis as much larger employers.

One of the most desirable aspects of the Act is the ability of a plan to remove a non-conforming employer from participation without jeopardizing the tax qualification of the entire plan.  Certain requirements need to be met, but they do not appear to be particularly onerous. The IRS will issue regulations that should clarify the nature of them.  This portion of the Act will become effective for plan years beginning after December 31, 2020.

By choosing to participate in a multiple employer plan, smaller employers will be able to avoid some or all of the separate reporting, bonding and disclosure requirements that otherwise would apply.  At the same time, multiple employer plans themselves will be easier to administer and can achieve protection from employer acts that could cause risk to the plan and other participating employers.