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United States Government Accountability Office: 
GAO: 

Report to the Chairman, Committee on Health, Education, Labor, and 
Pensions, U.S. Senate: 

September 2012: 

Private Sector Pensions: 

Federal Agencies Should Collect Data and Coordinate Oversight of 
Multiple Employer Plans: 

GAO-12-665: 

GAO Highlights: 

Highlights of GAO-12-665, a report to the Chairman, Committee on 
Health, Education, Labor and Pensions, U.S. Senate. 

Why GAO Did This Study: 

GAO has reported that millions of U.S. workers lack access to employer-
sponsored pension plans and that some small businesses, which offered 
plans at lower rates than large businesses, may be deterred by the 
cost of plan administration. MEPs, a type of pension plan maintained 
by more than one employer, have been supported as an option that could 
expand coverage by lowering administrative costs. For this report, GAO 
examined (1) the characteristics of private-sector MEPs, (2) the 
advantages and disadvantages of MEPs and how their perceived 
advantages are used to market them, and (3) how IRS and Labor regulate 
MEPs. 

GAO interviewed MEP sponsors, pension experts, officials at the 
Department of Labor (Labor), the Internal Revenue Service (IRS), and 
the Pension Benefit Guaranty Corporation (PBGC), and analyzed the 
primary source of pension data reported to the government—the Form 
5500. 

What GAO Found: 

Little is known about the characteristics of private sector multiple 
employer plans (MEP), especially information regarding the employers 
that participate in them. Although no participating employer 
information is currently collected in the Form 5500, the primary 
source for pension information reported to the government, some plan-
level information on MEPs is available. GAO’s analysis of 2009 plan-
level data shows that the bulk of MEP participants and assets resided 
in the largest 25 private-sector MEPs. Three major sponsor types 
emerged among the top 25 plans: large corporations, associations, and 
professional employer organizations (PEO), which are firms that 
provide payroll and other human resources services to clients. These 
sponsor types differ in various ways, but notably, associations and 
PEO sponsors GAO interviewed tended to have a large number of 
employers participating in their plans. Little is also known about a 
fourth category of sponsor type called “open” MEPs, a type of MEP in 
which employers in the plan share no common relationship or 
affiliation with the other employers in the plan. This sponsor type 
appears to have come about in response to 2002 IRS guidance that 
allowed certain PEOs to avoid tax disqualification of their pension 
plans if they were converted to MEPs. Soon after this guidance was 
issued, practitioners began offering open MEPs. 

MEPs are marketed as providing several advantages for employers over 
single-employer plans, but GAO found that these advantages may not 
always be unique to MEPs. MEPs are marketed as providing reduced 
fiduciary liability, administrative responsibility, and cost. However, 
other types of single-employer plans may also offer reduced fiduciary 
responsibility and third-party administrators can reduce 
administrative responsibilities. Overall, among MEP representatives 
and pension experts, there was no consensus on whether or not open 
MEPs or PEO-sponsored MEPs could substantially expand pension 
coverage. Given that employers do not directly oversee the plan, there 
was also some concern from Labor officials regarding the risk of MEP 
abuses, such as charging excess fees or mishandling the plan’s assets. 
Additionally, because all of the participating employers are 
responsible for maintaining the MEP, if one employer becomes 
noncompliant with the tax requirements the plans of all the employers 
in the MEP may lose their tax-qualified status. 

Labor regulates MEPs for participant protections under the Employee 
Retirement Income Security Act of 1974 (ERISA), while the IRS 
regulates them for preferential tax treatment under the Internal 
Revenue Code (IRC). However, ERISA places requirements on plans that 
are not required under the IRC, and Labor and IRS do not coordinate to 
reduce the impacts of defining a MEP differently. For example, 
although Labor recently opined that open MEPs are a collection of 
single plans, each separately sponsored by participating employers for 
their employees, open MEPs still qualify for preferential tax 
treatment under the IRC. Pension experts told GAO that such differing 
treatment can create compliance challenges. For example, an open MEP 
may be able to file a single annual report for the IRS but may also 
have to file annual reports for each of its component plans for Labor. 
Pension experts agreed that compliance guidance from either agency 
would be helpful. 

What GAO Recommends: 

GAO recommends that Labor lead an effort to collect data on the 
employers that participate in MEPs. GAO also recommends that Labor and 
IRS formalize their coordination with regard to statutory 
interpretation efforts with respect to MEPs. Furthermore, Labor and 
IRS should jointly develop guidance on the establishment and operation 
of MEPs. Agencies generally agreed with GAO’s recommendations. 

View GAO-12-665. For more information, contact Charles Jeszeck at 
(202) 512-7215 or jeszeckc@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

MEP Advantages Marketed to Employers May Not Be Unique: 

IRS and Labor Treat MEPs Differently, Reflecting a Lack of 
Coordination: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: GAO Analysis of Multiple Employer Plan Data: 

Appendix II: Comments from the Department of Labor: 

Appendix III: Comments from the Department of the Treasury: 

Appendix IV: Comments from the Pension Benefit Guaranty Corporation: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Percentage of Defined Benefit MEPs, by Reported Funding 
Method, 2009: 

Table 2: Total Plan Assets of MEPs, by Plan Type and Plan Year: 

Table 3: Percentage of All Assets Represented by MEPs, by Plan Type 
and Plan Year: 

Table 4: MEP Participating Employer Estimates, Mean, Median and 
Maximum Employers, 2001: 

Table 5: Maximum Number of Participants and Percentage of Participants 
in MEPs by Sponsor Industry and by Plan Type, 2009: 

Table 6: Maximum Number of MEPs and Percentage of MEPs by Sponsor 
Industry and by Plan Type, 2009: 

Table 7: Percentage of Benefit Types Represented within Each Defined 
Benefit Plan Type, 2009: 

Table 8: Percentage of Pension Feature Types Represented within Each 
Defined Contribution Plan Type, 2009: 

Table 9: Percentage of Defined Contribution Plans by Single, Multiple, 
and Multiemployer Plan Status by Range of Plan Participants, 2009: 

Table 10: Percentage of Defined Benefit Plans by Single, Multiple and 
Multiemployer Plan Status by Range of Plan Participants, 2009: 

Figures: 

Figure 1: Number of Defined Benefit and Defined Contribution MEPs with 
Percent Change between Periods, 2001 and 2009: 

Figure 2: Number of Defined Benefit and Defined Contribution MEP 
Participants with Change between Periods, 2001 and 2009: 

Figure 3: Top 25 Plan Sponsors of Defined Benefit MEPs, as Measured by 
Total Plan Participants, 2009: 

Figure 4: Top 25 Plan Sponsors of Defined Contribution MEPs, as 
Measured by Total Plan Participants, 2009: 

Figure 5: Percentage of MEPs by Range of Participating Employers in 
the Plan, 2001 Estimate: 

Abbreviations: 

EBSA: Employee Benefits Security Administration: 

EFAST: ERISA Filing Acceptance System: 

ERISA: The Employee Retirement and Income Security Act of 1974: 

IRC: Internal Revenue Code: 

IRS: Internal Revenue Service: 

Labor: Department of Labor: 

MEP: Multiple Employer Plan: 

MEWA: Multiple Employer Welfare Arrangement: 

NAPEO: The National Association of Professional Employer Organizations: 

PBGC: Pension Benefit Guaranty Corporation: 

PEO: Professional Employer Organization: 

Treasury: Department of the Treasury: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

September 13, 2012: 

The Honorable Tom Harkin: 
Chairman: 
Committee on Health, Education, Labor and Pensions: United States 
Senate: 

Dear Chairman Harkin: 

Millions of American workers lack access to employer-sponsored pension 
plans. Those who work for small employers are typically less likely to 
have a pension than workers in larger firms. GAO recently reported 
that small employers face several challenges to establishing and 
maintaining pension plans.[Footnote 1] In particular, small employers 
may be reluctant to sponsor a plan because the employer is overwhelmed 
by the number of plan options, administrative requirements, and 
fiduciary responsibilities. Consequently, some have argued that 
pension arrangements that pool costs and administrative 
responsibilities could lead to increased coverage. 

Multiple employer plans (MEP),[Footnote 2] a type of pension plan 
covering employees of more than one employer, have been suggested as a 
viable way to increase coverage by pooling costs. A range of 
legislative proposals, going at least as far back as the 1970s, have 
been put forth to encourage pooled pension arrangements for employers, 
but were never enacted. Further, an emerging trend in private sector 
MEP sponsorship seems to suggest a renewed interest in private sector 
MEPs; however, little is known about private sector MEPs and the 
importance or effectiveness of these plans for small employers. 
Additionally, little is known about the challenges, if any, that MEPs 
may present to the agencies charged with oversight of pension plans: 
the Department of Labor (Labor), the Department of the Treasury's 
(Treasury) Internal Revenue Service (IRS), and the Pension Benefit 
Guaranty Corporation (PBGC). This report provides an overview of the 
characteristics and utilization of these plans. To this end we will 
answer the following questions: 

(1) What are the characteristics of private sector MEPs? 

(2) What are the advantages and disadvantages of MEPs and how are the 
perceived advantages being used to market MEPs as a pension design 
option? 

(3) How do IRS and Labor regulate MEPs? 

To address our objectives, we assessed and analyzed 2009 Form 5500 
data,[Footnote 3] the primary source of information for both the 
federal government and the private sector on employee benefit plans. 
We also analyzed 2001 Form 5500 data to assess trends over time, as 
well as information on participating employers that existed at that 
time. We interviewed at least three plan-sponsor representatives from 
each of the four private sector MEP sponsor types we identified via 
research and interviews. The major sponsor types include: certain 
large corporations, associations, professional employer organizations 
(PEO), and unaffiliated or "open" MEPs.[Footnote 4] We identified 
three sponsor types from a list of MEPs drawn from Form 5500 data and 
we selected interviewees from among the largest sponsors of each 
type.[Footnote 5] We identified open MEPs as an emerging sponsor type, 
though sponsors of these plans were often new and not necessarily 
identified by Form 5500 filings. We selected these open MEP sponsors 
through Internet searches and interviewed them as well. We also 
conducted a literature review, and interviewed agency officials, 
including officials at Labor, IRS, and PBGC, as well as pension 
professionals and experts. Our selection of pension experts included 
actuarial experts representing their professional association, as well 
as various other pension experts, particularly those with 
administrative and legal expertise.[Footnote 6] We reviewed relevant 
federal laws and regulations, as well as agency guidance--most notably 
in the form of advisory opinions issued by Labor. Following the 
issuance of recent advisory opinions, we sought reactions from the MEP 
sponsors and pension experts. We conducted our work from March 2011 to 
September 2012 in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe the information and data obtained, and the 
analysis conducted, provide a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Background: 

Under Title I of the Employee Retirement Income Security Act of 1974 
(ERISA),[Footnote 7] employers are permitted to sponsor two broad 
categories of pension plans. They are (1) defined benefit plans--in 
which employers generally maintain a fund to provide a fixed level of 
monthly retirement income based on a formula specified in the plan 
[Footnote 8]--or (2) defined contribution plans--in which retirement 
income is based on employer and employee contributions and the 
performance of investments in individual employee accounts.[Footnote 
9] A MEP may be a defined benefit plan or a defined contribution plan. 

There are three types of pension plans that share some features with 
MEPs but are not the focus of this report: (1) A single-employer plan 
is established and maintained by only one employer and for that 
employer's employees.[Footnote 10] (2) A multiemployer plan is another 
form of multiple employer arrangement where a plan is established and 
maintained pursuant to the terms of a collective bargaining agreement 
between at least one employee organization and more than one employer. 
[Footnote 11] Specifically, management and labor representatives must 
jointly govern these plans, in which participants can negotiate the 
plan benefits through a union.[Footnote 12] (3) A master or prototype 
plan is based on a largely uniform plan document sponsored by an 
organization for adoption by employers who are either its customers or 
members.[Footnote 13] An employer who adopts a master or prototype 
plan completes an adoption agreement to elect certain options 
specified in detail in a separate plan document, but generally the 
provider or sponsor centrally administers the plan and, in the case of 
a master plan, pools the assets of the adopting employers into a 
central investment trust.[Footnote 14] Banks, trade or professional 
organizations, insurance companies, and mutual funds are generally 
allowed by the IRS to provide master or prototype plans. 

In addition to employee pension benefit plans, ERISA covers employee 
welfare benefit plans for health care and other employee benefits as 
well. MEPs as pension plans have an analogous welfare arrangement 
called multiple employer welfare arrangements (MEWA). These are also 
maintained by multiple employers, and depending on the facts and 
circumstances, are single employer or multiple employer plans subject 
to requirements under ERISA. 

Labor, IRS, and PBGC share federal responsibility for regulating 
pension plans under ERISA. Labor enforces rules concerning how pension 
plans should operate in the best interest of participants and 
beneficiaries. Accordingly, Labor has the statutory authority to bring 
legal action against all fiduciaries under ERISA. Within Labor, the 
Employee Benefits Security Administration (EBSA) is charged with 
interpreting and enforcing laws designed to assure the security of the 
pension, health, and other employment-based benefits of American 
workers and their families. EBSA issues advisory opinions in which it 
facilitates compliance with ERISA through interpretative 
guidance.[Footnote 15] A plan sponsor may request a determination from 
EBSA that its arrangement constitutes an employee benefit plan under 
ERISA. Through its advisory opinions, EBSA provides the position of 
the department as to the application of one or more sections of ERISA. 
An advisory opinion, which is limited to the facts in the opinion, can 
be relied upon, as a legal matter, only by the parties in the opinion. 
However, these opinions serve as guidance to others on what 
arrangements are considered employee benefit plans under ERISA. 

IRS, on the other hand, is charged with determining whether a plan 
qualifies for preferential tax treatment in accordance with the 
Internal Revenue Code (IRC). Qualified pension plans receive favorable 
tax treatment, with deferral of taxes on contributions and investment 
earnings until benefits are received in retirement, and to be 
qualified a plan must, among other things, be maintained for the 
exclusive benefit of the plan sponsor's employees or their 
beneficiaries.[Footnote 16] Plans may apply to the IRS seeking an 
advance determination as to their qualified status. A favorable 
determination letter provides the plan sponsor with IRS's opinion that 
the terms of the plan as presented to the IRS, conform to the 
requirements of the IRC. 

Lastly, PBGC acts as an insurer of private-sector defined benefit 
pension plans by guaranteeing participant benefits up to certain 
statutory limits and, in the case of covered single-employer plans, 
protecting participants when the plan terminates with insufficient 
assets to pay all benefits, such as the bankruptcy of plan sponsors 
with underfunded plans. 

Little Is Known About Key MEP Characteristics: 

Little is known about the characteristics of private sector MEPs, 
particularly information about the employers that participate in them. 
No information with respect to participating employers in MEPs is 
currently collected in the Form 5500, which is the primary source of 
pension plan information for government oversight activities. However, 
basic plan and sponsor-level information on MEPs is available in the 
Form 5500 data, and we were able to analyze this data. The data show 
that MEPs are a small portion of the overall pension universe and that 
the bulk of plan assets and participants reside among the largest 25 
defined contribution and defined benefit MEPs. Lastly, we identified a 
new sponsor type of MEP: the "open" MEP. Unlike the other sponsors we 
identified, the employers that participate in open MEPs share no 
common relationship or affiliation with the other employers in the 
plan. 

MEPs Are Characterized by the Employers Participating in Them: 

As described previously, a MEP is a type of pension plan maintained by 
more than one employer.[Footnote 17] Typically, employers 
participating in a MEP have a common interest in some business or 
association, but do not share common ownership control.[Footnote 18] 
When employers decide to participate in a MEP, they legally adopt the 
plan as their own, as do other participating employers. A 
participating employer may sign an agreement that serves to identify 
the plan terms that will apply to its employees.[Footnote 19] 

Oversight agencies and plan administrators treat individual employers 
within the MEP as maintaining separate, single-employer plans for some 
purposes. For example, the IRS tests individual employers in a MEP 
separately against certain requirements designed to promote equity and 
inclusiveness of contributions and benefits across employees[Footnote 
20]. Additionally, a MEP may allow each participating employer to 
specify employer and employee contributions and allow participating 
employers to maintain unique plan benefit formulas. 

For other purposes, notably certain reporting and auditing 
requirements, oversight agencies treat the MEP as one plan.[Footnote 
21] Specifically, a MEP under ERISA must only file a single Form 5500. 
In addition, a defined benefit MEP pays a single-employer insurance 
premium to PBGC for the plan as a whole. 

Key Data That Characterize MEPs Are Not Collected: 

Currently, the federal government collects little MEP-specific 
information. Most notably, the Form 5500 is the primary source of 
pension plan information for government oversight activities. The Form 
5500 used to include an IRS schedule that required information on, 
among other things, the number of additional (or participating) 
employers in a MEP. However, it no longer collects this information; 
consequently, the agencies have no current data with respect to 
participating employers in a MEP.[Footnote 22] Participating employer 
information for a MEP is important because each employer may be unique 
in relation to the plan overall, with regard to discretionary plan 
options or its portion of the overall participants in the MEP. 

While the federal government no longer collects participating employer 
data, both IRS and Labor agreed that such information could be helpful 
to their oversight efforts. For example, Labor officials said that 
basic information about a MEP's participating employers, such as the 
number of employers or a list of names could be useful oversight 
information.[Footnote 23] Pension experts we talked with said that 
MEPs with especially large numbers of participating employers may be 
more challenging to administer. For example, as a MEP adds 
participating employers, the likelihood increases that one or more 
employers may fail nondiscrimination testing. This could ultimately 
jeopardize an entire MEP's preferential tax treatment. An IRS official 
acknowledged the value that having access to participating employer 
information could have in targeting plans that may have such plan 
testing issues. 

Besides participating employer information, Labor officials suggested 
that information identifying key MEP sponsor types or employer 
relationships may also be useful. As a possibility for gathering 
information about MEPs, Labor officials suggested requiring an initial 
Form 5500 filing immediately upon plan establishment. Another option 
would be to implement a registration requirement for newly-formed 
MEPs, though officials stated that Labor has no specific statutory 
authority to initiate collection of such information. 

According to some MEP sponsors, reporting basic information about the 
number of participating employers in a MEP would not be burdensome. 
However, a few sponsors also told us that, to avoid creating complex 
and burdensome reporting requirements, agencies would need to 
carefully consider the information to be collected. For example, 
dynamic interrelationships among participating employers, such as one 
employer being a subsidiary of another, would require carefully 
defining the term "participating employer."[Footnote 24] Nevertheless, 
a plan sponsor representative said participating employer information 
could be used for measuring a MEP's cost-effectiveness. 

MEPs Are a Small Portion of the Pension Plan Universe: 

The 2009 plan and sponsor-level Form 5500 data, the most current and 
complete year of data at the time of our analysis, show that MEPs 
comprise a relatively small portion of the universe of pension plans. 
[Footnote 25] Defined benefit and defined contribution MEPs each 
represent only 0.7 percent of approximately 46,000 private sector 
defined benefit plans and approximately 654,000 private sector defined 
contribution plans. The vast majority of pension plans are single-
employer plans. More specifically, MEPs account for only 318 defined 
benefit plans and 4,593 defined contribution plans. MEP sponsorship 
seems to be following the general trend away from traditional defined 
benefit plans and towards defined contribution plans. For example, 
from 2001 to 2009 the number of defined contribution MEPs appears to 
have grown by 20 percent, while the number of defined benefit MEPs 
shrank by over a third.[Footnote 26] (See figure 1). 

Figure 1: Number of Defined Benefit and Defined Contribution MEPs with 
Percent Change between Periods, 2001 and 2009: 

[Refer to PDF for image: vertical bar graph] 

Number of multiple employer plans: 

Year: 2001; 
Defined benefit plans: 480; 
Defined contribution plans: 3,837. 

Year: 2009; 
Defined benefit plans: 318; 
Defined contribution plans: 4,593. 

Percent change, 2001-2009: 
Defined benefit plans: -34%; 
Defined contribution plans: 20%. 

Source: GAO analysis of 2009 and 2001 Form 5500 data. 

[End of figure] 

While MEPs represent a relatively small percentage of pension plans, 
based on available data, they appear to represent a somewhat larger 
percentage of pension assets. For example, defined benefit MEPs 
represented about $110 billion in plan assets as of 2009--about 6 
percent of all defined benefit assets. Defined contribution MEPs 
represented an estimated $175 billion in assets--also about 6 percent 
of all defined contribution assets.[Footnote 27] The portion of all 
participants represented by MEPs is generally similar to the 
proportion of all assets represented by MEPs. In 2009, defined benefit 
MEPs included about 2.2 million participants--about 5 percent of all 
defined benefit plan participants. At the same time, defined 
contribution MEP participation grew--defined contribution MEPs 
currently cover over 4.5 million participants (about 5 percent of all 
defined contribution participants).[Footnote 28] (See figure 2.) 

Figure 2: Number of Defined Benefit and Defined Contribution MEP 
Participants with Change between Periods, 2001 and 2009: 

[Refer to PDF for image: vertical bar graph] 

Number of estimated MEP participants: 

Year: 2001; 
Defined benefit plans: 2,369,000; 
Defined contribution plans: 3,678,000. 

Year: 2009; 
Defined benefit plans: 2,187,000; 
Defined contribution plans: 4,547,000. 

Percent change, 2001-2009: 
Defined benefit plans: -8%; 
Defined contribution plans: 24%. 

Source: GAO analysis of 2009 and 2001 Form 5500 data. 

[End of figure] 

MEP Sponsorship Is Highly Concentrated among the Largest 25 Defined 
Benefit and Defined Contribution Plans: 

The preponderance of MEP assets and participants reside in a 
relatively small number of plans. Specifically, the largest 25 defined 
benefit MEPs ranked by number of participants represent nearly 76 
percent of all defined benefit MEP assets and 72 percent of all 
defined benefit MEP participants. Similarly, the largest 25 comparably 
ranked defined contribution MEPs represent about 51 percent of all 
defined contribution MEP assets and about 41 percent of all defined 
contribution MEP participants. Three major sponsor types appear among 
the largest 25 MEPs: large corporations, associations, and 
professional employer organizations (PEO). Additionally, we identified 
an emerging plan sponsor type that does not appear among the largest 
plans: the open MEP. 

Large Corporate MEPs: 

Large, Fortune 500, or Fortune Global 500 corporations make up the 
majority of plan sponsors among the largest 25 MEPs (see figs. 3 and 4 
in appendix I).[Footnote 29] For example, the defined benefit MEP 
maintained by General Electric is overall the third largest defined 
benefit plan in terms of total participants--representing 24 percent 
of all defined benefit MEP participants. The defined contribution MEP 
maintained by General Electric is the second largest defined 
contribution MEP and, when compared to all defined contribution plans, 
is the ninth largest defined contribution plan overall. 

Each of the sponsors we interviewed among these large corporate MEPs 
told us their plans became MEPs as a result of their corporate 
structure or transactions under which some or all employers were no 
longer in the same controlled group.[Footnote 30] In other words, the 
MEP may cover a corporation and its subsidiaries that are not under 
common control of the parent corporation.[Footnote 31] The large 
corporate MEP sponsors we interviewed reported few participating 
employers in their plans. One sponsor reported only two participating 
employers. The sponsor with the largest number of participating 
employers reported eight. 

Association MEPs: 

Association-sponsored plans also appear among the 25 largest defined 
benefit and defined contribution MEPs.[Footnote 32] The largest 
association-related defined benefit MEPs include the National Rural 
Electric Cooperative Association Retirement Security Plan, the United 
Benefits Group Co-op Retirement Plan, and the Pentegra Defined Benefit 
Plan for Financial Institutions. Among the largest defined 
contribution MEPs are The Young Men's Christian Association Retirement 
Fund Retirement Plan and the National Rural Electric Cooperative 
Association 401(k) Pension Plan. 

In contrast to our interviews with the large corporations that did not 
have common control of one or more employers in the plan, the 
associations had long-standing, continuously operating MEPs that, in 
most cases, were established prior to the enactment of ERISA. 
Additionally, these associations included a relatively large number of 
participating employers--well over 100 in most cases--and tended to be 
organized around a common trade or industry that served smaller 
employers. Two of the associations we interviewed reported an average 
of between 20 and 60 employees per participating employer. 

The association representatives we interviewed also said that they had 
a number of common operational structures. For example, each 
association had an appointed board made up of association members that 
served as the named fiduciary of the plan. Most of these associations 
required member representatives who sat on the association board to 
participate in the MEP. 

Additionally, a number of the association representatives noted the 
many advantages of the MEP model for associations. For example, 
especially in the case of defined benefit plans, as long as a 
participant remains an employee of an employer within the association, 
they can change jobs and continue earning additional benefits and 
vesting service credit towards association plan benefits. Moreover, 
because MEPs can pool resources, the plans can offer a broad enough 
array of benefit options to satisfy association members and 
participants. In order to leverage economies-of-scale, the MEP must 
keep the number of investment and benefit options manageable. However, 
one expert we spoke with said that certain association plans have been 
very effective at offering efficient, cost-effective retirement 
options for their members. 

Professional Employer Organization MEPs: 

PEOs are the last sponsor type that appeared among the largest MEPs. 
[Footnote 33] Specifically, two PEOs existed among the list of the 
largest 25 defined contribution MEPs in 2009--the ADP Totalsource 
Retirement Savings Plan and the Gevity 401(k) plan.[Footnote 34] 
According to the National Association of PEOs (NAPEO), PEOs provide 
human resource services to their small business clients by processing 
and administering wage and tax payments and assuming responsibility 
and liability for compliance with various state and federal laws and 
regulations.[Footnote 35] By NAPEO's estimate, PEO arrangements 
include between 2 and 3 million employees. 

The PEO representatives we interviewed said their PEOs operated under 
what they referred to as a "coemployer" contract.[Footnote 36] Though 
the term coemployer is not well-defined, according to the PEO sponsor 
representatives we interviewed, generally it means that a client 
employer signs a contract whereby the PEO assumes certain employer 
rights and responsibilities through the establishment and maintenance 
of an employer relationship with the workers assigned to its client. 
This usually includes administering a suite of human resources 
functions for the client such as payroll services, a worker's 
compensation program, and a health insurance plan. Additional services 
may also be offered or required, but each PEO representative we 
interviewed said their PEO also offered a 401(k) defined contribution 
plan. According to one PEO representative, the PEO-sponsored 401(k) 
MEP was the fourth-most selected service option by clients. However, 
another PEO noted that the client could also sponsor a separate, non-
MEP, single-employer plan--such as a 401(k)-style defined contribution 
plan--if it so chose. 

The PEOs from which we interviewed representatives offered many plan 
benefit features that could be highly customized to the client. For 
example, one PEO representative said their plan allows client 
employers to specify vesting schedules, choose among various levels of 
employer contributions or matches, and add profit-sharing features. 
[Footnote 37] The PEO representatives we interviewed said their PEOs 
had large numbers of participating employers in their plans.[Footnote 
38] Each PEO-sponsored defined contribution plan had at least 400 
participating employers, but one had about 2,700--nearly three times 
the largest number of participating employers that we estimated for 
2001.[Footnote 39] The size of the typical client employer varied 
significantly and ranged both across and within industry sectors. For 
one PEO, the typical client employer had between 20 and 50 employees, 
but the PEO also had a client with nearly 3,000 employees. Two PEO 
representatives reported that their PEOs serve a broad array of 
industry sectors, though one representative noted that client 
employers are generally in various "white collar" industries, such as 
health care or public relations. 

According to pension experts familiar with the industry and our 
analysis, PEO-sponsored MEPs grew both in size and number after IRS 
issued guidance in 2002 that identified defined contribution MEPs as a 
plan design some PEOs could use to avoid plan tax disqualification. 
[Footnote 40] According to one plan sponsor, since the guidance was 
issued, MEPs have been the default plan design for PEOs--but the 
guidance did not address what constituted a PEO. 

Open MEPs: 

Though not found among the largest plans, our review found that 
another MEP sponsor type emerged in recent years. As PEO-sponsored 
MEPs continued to grow, one firm, TAG Resources, LLC, started a new 
type of MEP: a defined contribution plan it called an "open" MEP. 
[Footnote 41] The key differences between PEO MEPs and open MEPs 
appear to be that open MEPs do not (1) offer payroll management or 
other administrative services PEOs typically offer, or (2) purport to 
be an employer of plan participants. Employers in open MEPs are 
related solely by their participation in the MEP. 

Since its inception in 2003, the TAG Resources open MEP grew to 
include 8,402 plan participants and about $64 million in assets at the 
end of the 2010 plan year. Another open MEP sponsored by 401kSafe, LLC 
was established in 2009 and already had 1,509 plan participants at the 
end of its 2010 plan year.[Footnote 42] According to its website, that 
plan had been maintained by the largest PEO in the southeastern United 
States and became an open MEP to expand its pension plan to non-PEO 
clients. 

While we identified only these two and two other open MEPs in Form 
5500 data,[Footnote 43] we independently identified many more that 
were apparently too new to appear in the data but were actively 
soliciting clients online. Plan sponsor representatives at one open 
MEP we spoke with said the plan already had about 500 participating 
employers and was adding up to 30 employers per month. Additionally, 
we identified a consulting group that was designing open MEPs to be 
sponsored in such a way as to appeal to third-party service 
providers.[Footnote 44] The third-party service provider would tailor 
the design of the plan to appeal to clients who might ultimately adopt 
the MEP as participating employers. 

MEP Advantages Marketed to Employers May Not Be Unique: 

Reflecting some of the content of the marketing material we reviewed 
from PEO MEPs and open MEPs, MEP representatives told us that MEPs 
provide several advantages for employers over single-employer plan 
sponsorship: reduced fiduciary liability, reduced administrative 
responsibility, and reduced cost.[Footnote 45] However, we found that 
these advantages may not always be unique to MEPs.[Footnote 46] Based 
on our interviews with MEP representatives and the fact that, as 
stated earlier in this report, PEO and open MEPs are new and different 
compared to the other MEP types, it may be that PEO MEPs and open MEPs 
are the only MEP types marketing MEPs to employers. Consequently, the 
following section focuses on the advantages of MEPs overall in the 
context of how they would be presented to employers. 

Reduced fiduciary liability--According to all of the PEO and open MEP 
representatives we interviewed, the firms that offer MEPs take on some 
fiduciary duties that would otherwise remain solely with the employers 
if employers managed their own plans; however, exactly how much relief 
from liability, if any, the firm can provide to employers is unclear. 
[Footnote 47] In taking some of the fiduciary responsibility, these 
firms have control over the management or assets of the plan, which, 
according to one MEP representative, includes fund selection, due 
diligence in tracking the investment performance, and employee 
communication. Prior GAO work identified the burden of fiduciary 
liability as a possible impediment to small-employer plan 
sponsorship.[Footnote 48] According to one open MEP representative, 
reducing fiduciary liability is the primary reason employers 
participate in MEPs. Our prior work suggests this may be because some 
employers are not familiar with how to manage a plan. However, there 
may be other ways for employers to gain the same degree of reduced 
fiduciary responsibility as afforded by a MEP. For example, we found a 
firm marketing its willingness to establish and manage the investments 
of single-employer plans on the behalf of individual employers. 
[Footnote 49] 

In contrast to the claims made by some MEP representatives, several 
plan representatives and pension experts we spoke with said firms that 
offer MEPs cannot assume all fiduciary liability on behalf of the 
participating employer. Although a firm that offers a MEP can 
generally control the plan on behalf of the participating employers, 
as Labor notes on its website, at a minimum, the employers must still 
select a MEP to join, which is considered a fiduciary function, and 
retain responsibility to monitor the plan's investments and fees. 
However, some MEP marketing materials we reviewed may give an 
impression that enrolling in MEPs eliminates fiduciary liability for 
employers entirely. Further, two of the MEP representatives stated 
that MEPs did eliminate fiduciary liability for employers. 

Reduced administrative responsibility--All of the PEO and open MEP 
representatives we interviewed said firms that offer MEPs assume 
administrative responsibilities that employers would retain if they 
managed their own plans. Several MEP representatives said MEP 
administrators can complete the record keeping and annual testing, and 
submit required filings such as a single Form 5500 for the MEP on 
behalf of all the participating employers. Additionally, a couple of 
the interviewees said that employers not already offering plans might 
find it easier and faster to join a MEP than to create their own 
administrative structure with a single-employer plan. However, our 
prior work has shown that individual sponsoring employers can also use 
service providers to perform administrative functions similar to those 
that MEPs offer.[Footnote 50] Further, PEOs that offer payroll 
services may offer similar plan administrative services for small 
employers that sponsor a single-employer plan through the PEO. 
[Footnote 51] Consequently, it is unclear how, if at all, the 
administrative services offered by a MEP differ significantly from 
those offered for a single plan through a PEO. Finally, a couple of 
MEP representatives identified the difficulty involved with tracking 
some of the administrative tasks needed for a MEP if the participating 
businesses did not have a common payroll remitter. One pension expert 
thought that this complexity increased the chance that the MEP could 
fail to meet some of its administrative responsibilities. 

Reduced cost--All of the PEO and open MEP representatives we 
interviewed thought that participating in MEPs may offer reduced costs 
as compared to single-employer plan sponsorship since participating 
employers can pool assets to obtain the lower pricing available to the 
larger plans. Additionally, several interviewees described how 
employers may not need to pay for additional services from third-party 
administrators or financial experts, which may be similar to what our 
prior work described as bundled services.[Footnote 52] Further, while 
enrolling in MEPs can save time for employers without a prior plan, as 
mentioned earlier, a couple of interviewees said MEPs may also save 
money since the employer will not need to spend money to create an 
initial plan document for a new single-employer plan. Lastly, in some 
cases, a firm offering a MEP is only required to conduct a single plan 
audit, which a few interviewees told us can be expensive for 
individual employers sponsoring their own plans. This may reduce costs 
for larger participating employers; however, employers with fewer than 
100 participants are not required to audit their plans. 

Overall, no consensus existed among MEP representatives and pension 
experts on whether or not MEPs such as PEO MEPs or open MEPs would 
substantially expand pension coverage. Several MEP representatives 
thought that MEPs had the potential to expand coverage, especially 
among small to mid-size employers that could benefit from the 
potential administrative and cost advantages. However, a couple of 
pension experts were skeptical that open MEPs would have much of an 
impact in expanding retirement plan coverage. For example, one pension 
expert said employee demand, rather than cost benefits offered by 
MEPs, drives whether or not a business sponsors a plan. In our prior 
work, small employers reported that employees may prefer to have 
health care coverage or may not be interested in participating in a 
retirement plan.[Footnote 53] The pension expert also observed that 
small businesses do not extensively research retirement plans or 
actively seek them out. As a consequence, marketing may be the biggest 
determinant of MEP growth. Additionally, while a couple of the MEPs we 
spoke with had offerings for employers to start new plans through the 
MEP, several targeted businesses with existing plans. For example, an 
open MEP representative said their adopting employers usually have 
over 100 employees or plan assets of $2 million to $5 million. 

There is also concern about whether MEPs are any more or less prone to 
abuse than other types of pension arrangements. Labor officials said 
the potential for inadequate employer oversight of the MEP is greater 
because employers have passed along so much responsibility to the 
entity controlling the MEP. Labor officials noted that potential 
abuses might include layering of fees, misuse of the assets, or 
falsification of benefit statements.[Footnote 54] One pension expert 
agreed that there was potential for MEPs to charge excess fees without 
the enrolled employer being aware of those fees.[Footnote 55] While 
Labor officials acknowledged that single-employer plans could be 
subject to similar abuses, they cautioned that MEPs' structure and 
operation could make them particularly susceptible to such abuses. 

Finally, a number of interviewees identified the "bad apple rule" as a 
potential problem for MEPs. Specifically, in order to retain its tax-
qualified status and the associated tax advantages for the employer 
and employees, IRS requires the firm offering the MEP to annually test 
each employer to ensure that the contributions or benefits provided 
under the plan do not discriminate against rank-and-file workers in 
favor of highly compensated employees.[Footnote 56] If the tests find 
that one participating employer discriminated against its rank-and-
file workers, this might cause the entire MEP to be considered 
noncompliant. However, many MEP representatives we had spoken with 
said that, to date, they had never needed to expel a participating 
employer because of noncompliance and that making voluntary compliance 
corrections with the IRS was not difficult.[Footnote 57] 

IRS and Labor Treat MEPs Differently, Reflecting a Lack of 
Coordination: 

Labor and IRS treat MEPs differently because they are charged with 
interpreting different titles of ERISA.[Footnote 58] Labor is 
primarily responsible for interpreting and applying Title I of ERISA, 
which, among other things, defines an employee benefit plan.[Footnote 
59] In contrast to Labor, IRS is responsible for determining whether 
plans qualify for preferential tax treatment under Title II of ERISA, 
which amended the IRC. For Labor's purposes, under ERISA a plan can be 
maintained only by an employer, an employee organization, or 
both.[Footnote 60] For the IRS's purposes, the IRC does not contain a 
definition of "employee benefit plan," nor does it include any 
explicit requirement that a plan be maintained by an employer or an 
employee organization. 

Labor and IRS have not fully coordinated their statutory 
interpretations related to MEPs with Labor's advisory opinions. On May 
25, 2012, Labor issued two advisory opinions on open MEP arrangements 
and found an open MEP was not a single employee benefit plan under 
Title I of ERISA.[Footnote 61],[Footnote 62] However, applying tax 
law, IRS has found at least one open MEP, operating since 2003, 
qualified for preferential tax treatment.[Footnote 63] IRS officials 
said IRS does not take into consideration a MEP's status under Title I 
of ERISA when considering whether it qualifies for preferential tax 
treatment. IRS focuses solely on compliance with IRC provisions. In 
the advisory opinions, Labor, and more specifically EBSA, opined that 
it considers the participating employers in an open MEP to be 
sponsoring their own plans for their own employees. The advisory 
opinions mean that an open MEP is simultaneously considered both a 
single plan by IRS, for purposes of certain tax laws, and a series of 
plans by Labor.[Footnote 64] This presumably means that an open MEP 
will have to file annual reports on behalf of each individual employer 
to satisfy Labor and also as one single plan to satisfy IRS. Filing 
both ways would create duplications in reporting and redundancies in 
Form 5500 data.[Footnote 65] 

The May 25th advisory opinions are the latest in a series of advisory 
opinions dating back to at least the late 1970s on benefit plans 
maintained by multiple employers.[Footnote 66] On both MEWAs 
(arrangements providing welfare benefits such as health coverage) and 
MEPs, Labor has held that multiple employers may maintain a single 
plan through a bona fide employer group or association of employers. 
However, Labor has been careful to define the nature of such an 
association in advisory opinions.[Footnote 67] A bona fide association 
may establish a plan because Labor considers the association to be an 
"employer" under section 3(5) of ERISA.[Footnote 68] Labor clarified 
in the May 25th opinions that it interprets the term "employer" in 
ERISA as having the same meaning whether applied to MEWAs or MEPs. 
[Footnote 69] 

Labor and Treasury are required to coordinate under ERISA.[Footnote 
70] Labor and IRS have discussed these issues, but they have not 
coordinated to develop rules, policies, or practices to reduce the 
duplication of reporting and the burden of compliance with ERISA. IRS 
officials said they recognize the need to work with Labor on these 
issues, but they have not yet formulated the changes that may need to 
be implemented. Labor and IRS maintain an agreement relating to 
coordinating investigations generally, but the agreement does not 
include any coordination of statutory interpretations reflected in 
Labor's advisory opinions related to MEPs. 

Labor's Response to Open MEPs Leaves Unanswered Compliance Questions: 

Labor's May 25th advisory opinions have implications for those 
administering or planning to administer an open MEP. These opinions 
clarify that reporting, auditing, and bonding requirements--which MEPs 
applied across participants in the aggregate--must be applied to each 
participating employer in an open MEP. Employee benefit plans under 
ERISA are subject to ERISA's fiduciary provisions and are required to 
file an annual report with Labor (using a Form 5500).[Footnote 71] 
Labor may fine plan administrators who fail to file an annual report 
up to $30,000 per year until the report is filed. 

The advisory opinions will likely prompt a range of responses 
according to those we interviewed. Two open MEP representatives 
reported they will take steps to bring their arrangements into 
compliance. An open MEP's fiduciaries can conduct new plan audits, 
assure employer compliance with ERISA fidelity bond requirements, and 
file Form 5500s for each employer, according to an open MEP 
representative and a pension expert. Others will likely exit the 
market, according to one pension expert. Some representatives of MEPs 
sponsored by PEOs and associations reported that the opinions had no 
impact on their plans. 

The advisory opinions may also affect federal oversight of open MEPs. 
A pension expert said open MEPs would be more likely to be selected 
for an IRS audit as a result of the increased reporting. The pension 
expert also suggested that disaggregating open MEPs into their 
underlying ERISA plans may reveal prohibited transactions that were 
not obvious before.[Footnote 72] 

The advisory opinions could also lead to higher costs for open MEPs. 
Treating participating employers as plan sponsors will be expensive, 
according to some MEP representatives and pension experts. Some open 
MEP representatives said firms would pass costs associated with 
compliance on to plan participants. One representative estimated 
administrative fees covering plan maintenance costs could increase by 
up to 50 percent and that increased costs will create a disincentive 
to plan formation and contract pension coverage. 

MEP sponsors have already raised questions about the broader 
applicability of the advisory opinions. Specifically, they have made 
informal inquiries to Labor as to whether their pension benefit 
arrangements are in fact open MEPs. Labor officials encouraged those 
sponsors to submit a formal request for an advisory opinion. Labor 
officials said each advisory opinion is based on the facts presented 
and, as established under its procedure for advisory opinions, only 
the parties described in the request for the opinion may rely on the 
opinion. However, advisory opinions provide a legal interpretation of 
ERISA and a discussion of factual situations that may be useful to 
persons not subject to it. Labor officials said that they issued 
opinions on two different plan structures to show that the agency's 
reasoning would hold under various circumstances. 

Compliance assistance from Labor or IRS would help open MEP sponsors 
navigate the compliance requirements, according to two pension 
experts. One pension expert said that prompt guidance would be vital 
since certain plan sponsors submit requests for IRS determinations of 
their plans' tax-qualified status on a 5-year cycle, and MEPs are in 
such a cycle now.[Footnote 73] However, IRS officials reported that as 
of June 21, 2012, they were still in the process of analyzing Labor's 
advisory opinions, and did not yet know if they would need to change 
their determination procedures accordingly. IRS officials told us it 
was premature to consider changes to their determination procedures 
until they analyze the full impact of the opinions and more fully 
discuss them with Labor. IRS officials noted any such change would 
necessitate an outreach program to employers and practitioners. Labor 
officials said they are responding to inquiries by open MEPs on a case-
by-case basis as part of their normal compliance and enforcement 
activities.[Footnote 74] 

Policy questions may still need to be addressed. One pension expert 
explained that while Advisory Opinion 2012-04A clarified Labor's 
position on open MEPs, it did not explain Labor's underlying policy 
concerns in detail. The opinion also did not provide Labor's view on 
the potential of open MEPs to lower plan costs or expand coverage. One 
pension expert suggested Labor officials may have felt bound to the 
agency's prior position by decades of existing precedent. However, 
another pension expert suggested Labor could have deemed open MEPs to 
be plans under ERISA but gave greater weight to its objective of 
ensuring benefit security. Both open MEP representatives and these 
pension experts said open MEP-like designs will continue to receive 
the attention of policymakers, given interest in expanding pension 
coverage.[Footnote 75] Pension experts also cautioned that any 
legislative change allowing certain open MEPs should ensure that there 
are appropriate safeguards to protect plan participants.[Footnote 76] 

Conclusions: 

MEPs are touted by some as a way for small employers to centralize 
administration and reduce pension plan costs. However, given that no 
data are collected on participating employers in MEPs, pension experts 
and agency officials cannot determine how employers utilize MEPs, let 
alone how beneficial the MEP design may be to employers and plan 
participants. While MEPs have long been affiliated with associations 
or complicated employer relationships, new sponsor types have emerged 
that call into question the current understanding of these 
relationships, which are a key aspect of ERISA's requirements on 
employee benefit plans. Furthermore, it appears that actions taken by 
IRS, while providing some relief to certain PEOs has fostered the 
adoption of these new sponsor types of MEPs, including the most 
recent: "open" MEPs. Yet, at this time, no one knows for certain how 
many open MEPs there are, who is in them, or how they may affect 
future pension coverage. To identify ways to assess, mitigate, and 
monitor risks of MEPs in the future, Labor needs comprehensive and 
more current information about MEPs and their designs. 

There also appears to be a lack of coordination between IRS and Labor 
on the application of different statutory requirements to MEPs. Newer 
MEP designs appear to be a result of practitioners interpreting IRS 
guidance on their tax-qualified status as a broader endorsement of 
their plan designs. However, following the IRC, IRS does not take into 
account ERISA Title I standards for employee benefit plans when 
determining tax-qualified status. The IRS may continue to find that an 
open MEP qualifies for preferential tax treatment and promoters may 
use such qualification as a tool for marketing their arrangements to 
employers--even though Labor does not consider an open MEP to be a 
single employer benefit plan under ERISA. Inadequate coordination, 
rather than setting the groundwork for sound, sensible, and cost-
efficient oversight, is likely to lead to future compliance 
uncertainty and may ultimately risk participants' retirement security. 

Labor's recently issued advisory opinions, consistent with previous 
opinions on employee benefit plans, establish that a common employment 
nexus or other genuine organizational relationship unrelated to the 
provision of benefits is required to maintain a pension plan among 
multiple employers. Labor's expectation is that the recently issued 
opinions on open MEPs will serve as guidance to the pension industry 
at large. However, the application of such specific opinions is not 
always clear, and may be shaped by future requests for additional 
advisory opinions. 

Recommendations for Executive Action: 

Labor: 

The Secretary of Labor should direct the EBSA to take the lead in 
gathering useful oversight information about the employers that 
participate in MEPs. A likely source for collection of this data would 
be the Form 5500, as it is the primary source of private pension data 
for government oversight activities. 

Labor and Treasury: 

The Secretary of Labor should instruct the Assistant Secretary of EBSA 
and the Secretary of the Treasury should instruct the Commissioner of 
Internal Revenue to formalize their coordination with regard to the 
statutory interpretations reflected in Labor's advisory opinions 
related to MEPs. Furthermore, the agencies should coordinate to 
develop compliance-related guidance on the establishment and operation 
of MEPs under ERISA and the IRC. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to Labor, Treasury (specifically 
including IRS), and PBGC for their review and comment. Labor, Treasury 
and PBGC provided written comments, which are reproduced in Appendix 
II, III, and IV respectively. PBGC and Labor provided technical 
comments, which we incorporated where appropriate. 

The agencies generally agreed with the findings and conclusions of the 
report. Additionally, they expressed a commitment to expanding 
retirement plan coverage while also protecting the retirement benefits 
of workers, retirees and their families. GAO shares this commitment to 
expanding and promoting pension coverage in a manner that bolsters the 
retirement security of American workers. However, largely due to a 
lack of data, we could not fully examine how MEPs are utilized by 
employers or how they affect pension coverage overall. With better 
information to permit appropriate oversight, new MEP designs may prove 
to be viable options for sponsors and participants. 

The agencies generally agreed with the recommendation on data and 
suggested that, as part of their regular evaluations of changes to the 
Form 5500, they would consider the merits of alternative methods of 
collecting additional data about employers that participate in MEPs, 
among other possible changes to the Form 5500. We believe that such an 
evaluation is an important first step in determining how to collect 
useful information on employers that participate in MEPs. 

The agencies also agreed with our recommendation to provide for 
coordination of the statutory interpretations of Title I of ERISA and 
Title II of ERISA (as reflected in the IRC) in connection with MEPs. 
We are encouraged that the agencies coordinated on the advisory 
opinions to some extent during their development and issuance--
consulting on the text of the opinions, making revisions, and 
discussing issues arising from their issuance. We added language in 
our report to reflect this coordination. Additionally, we modified the 
recommendation to acknowledge that there are a variety of mechanisms 
they could use to improve and formalize their coordination. Labor and 
IRS said they would amend their coordination agreement when compliance 
issues become more apparent or if the impact of the advisory opinions 
suggests such coordination would be helpful. 

While our recommendation did not specify how or when the agencies 
should modify or formalize coordination agreements on statutory 
interpretations, we believe that it would be prudent to do so sooner 
rather than later. With respect to mechanisms for formalizing future 
coordination of statutory interpretations on MEPs in a more 
deliberative way, the agencies could modify their existing agreement 
on investigations or, if more appropriate, the agencies could initiate 
a new agreement, for example, via a memorandum of understanding or 
similar document. Further, our report contains evidence that the 
conditions the agencies believe would warrant modifying or formalizing 
agreements are already evident, namely concerns about compliance and 
the possible impacts of the opinions. Additionally, our report notes 
that the advisory opinions do not preclude the IRS from determining 
that open MEPs qualify for preferential tax treatment in the future. 
Currently, each of the three primary agencies regulating MEPs uses 
different criteria to define these plans for plan sponsors and 
administrators. Absent coordinated federal decisions, the potential 
exists for uncertainty within the regulated community and confusion 
for employers. By coordinating their statutory interpretations and 
subsequent guidance, these agencies could start to help create a 
clear, unified regulatory environment to optimize the potential for 
MEPs as an effective vehicle of pension coverage. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 21 days 
from the report date. We are sending copies of this report to the 
Secretary of Labor, the Secretary of the Treasury, the Director of 
PBGC, and other interested parties. This report is also available at 
no charge on the GAO website at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for: 

our Offices of Congressional Relations and Public Affairs can be found 
on the last page of this report. Key contributors are listed in 
appendix V. 

Sincerely yours, 

Signed by: 

Charles Jeszeck: 
Director, Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: GAO Analysis of Multiple Employer Plan Data: 

To determine the largest multiple employer plan (MEP) sponsors and 
other key MEP characteristics, we analyzed electronic Form 5500 
information, the primary source of private pension data.[Footnote 77] 
We analyzed 2009 Form 5500 information, the most current and complete 
year, and also used 2001 information to compare trends over time. We 
chose 2001 Form 5500 data as the comparison year because 2001 
information is known to have fewer errors than certain prior years. 
The 2001 data also includes the Schedule T, which allowed us to 
estimate employers participating in MEPs for that year. 

Problems with the electronic data of the Form 5500 have been 
previously documented.[Footnote 78] However, we took steps to assess 
the reliability of the data and determined the data to be sufficiently 
reliable for our purposes. For example, we performed computer analyses 
of the data and identified inconsistencies and other indications of 
error and took steps to correct inconsistencies or errors. A second 
analyst checked all computer analyses. 

We chose to use "raw" 5500 data rather than Labor's research files 
because the research data do not specifically focus on MEPs. According 
to Employee Benefits Security Administration (EBSA) officials, the 
research data are cleaned for common mistakes and the main focus of 
the effort is to assure that the historical relationship between 
single and multiemployer plans is accurate. Thus, the research data 
are not specifically cleaned with respect to MEP identification. Thus, 
MEPs may be recoded in the research data to single or multiemployer 
plans and there is no specific effort to better identify MEPs in the 
data. 

We found the Department of Labor's (Labor) characterization of MEPs in 
the research files not to be well-suited for our analysis. Labor's 
research data appear to recode a sponsor's indication of MEP status 
using an inconsistent method. This inconsistency is noted in certain 
Labor publications.[Footnote 79] For example, Labor does not publish 
basic pension plan information about MEP sponsorship in its Private 
Pension Bulletins. The bulletins include only information about single-
employer and multiemployer plans and include MEPs as either a single-
or multiemployer plan type. In the footnotes, which disclose how MEPs 
are allocated across the single-and multiemployer categories, 
indication of collectively bargained participants in the MEP is the 
key determinant. For example, one of the footnotes indicates that if 
the MEP includes collectively bargained participants it would be 
characterized as a multiemployer plan in the bulletin. This is 
inaccurate--and at odds with the Form 5500 instructions--as MEPs may 
or may not include participants that are subject to collective 
bargaining; however, the collective bargaining agreement does not 
define the conditions and maintenance of the plan as it does for a 
multiemployer plan. Further, MEP administrators pay single-employer 
premiums for the MEP as a whole for purposes of Pension Benefit 
Guaranty Corporation (PBGC) insurance. 

We also found that Labor does not consistently recode MEPs in the Form 
5500 research file according to collective bargaining status--which 
violates the stated allocation rules in the footnotes of the pension 
bulletin. Certain MEPs that include participants that are subject to 
collective bargaining may be recoded as single-employer plans. 

For our analysis we made no attempt to recode plan types, notably for 
those plans identified as MEPs. Labor officials told us that certain 
plans may be mistakenly identified as MEPs on the Form 5500, but may 
actually be another plan type. However, to identify such mistakes 
would require detailed and time-consuming review of plan and sponsor 
documentation that is not publicly available and may not be 
definitive. Thus, our analysis of MEP and other plan types is limited 
to the self-reported plan status as indicated by the Form 5500 filer. 

Given that little information about MEPs is known or publicly 
available, we have included additional tables and figures from our 
analysis that were not included in the body of this report. These 
figures and tables include information about the largest MEPs, plan 
funding methods, key sponsor industries, and participating employer 
information culled from Schedule T attachments. 

Figure 3: Top 25 Plan Sponsors of Defined Benefit MEPs, as Measured by 
Total Plan Participants, 2009: 

[Refer to PDF for image: table] 
  
Rank: 1; 
Plan sponsor (Plan name): General Electric Company (GE Pension Plan); 
Year plan established: 1912; 
Total participants: 529,666; 
Percentage of all defined benefit MEP participants represented by 
plan: 24.2%; 
Plan assets (actuarial assets): $44.80 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 40.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 2; 
Plan sponsor (Plan name): American International Group, Inc. (American 
International Group, Inc. Retirement Plan); 
Year plan established: 1985; 
Total participants: 73,289; 
Percentage of all defined benefit MEP participants represented by 
plan: 3.4%; 
Plan assets (actuarial assets): $2.72 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 2.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 3; 
Plan sponsor (Plan name): Siemens Corporation (Siemens Pension Plan); 
Year plan established: 1965; 
Total participants: 68,632; 
Percentage of all defined benefit MEP participants represented by 
plan: 3.1%; 
Plan assets (actuarial assets): $2.79 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 2.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 4; 
Plan sponsor (Plan name): YUM Brands, Inc. (YUM Brands Retirement 
Plan); 
Year plan established: 1997; 
Total participants: 64,028; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.9%; 
Plan assets (actuarial assets): $0.65 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 
Rank: 5; 
Plan sponsor (Plan name): National Rural Electric Cooperative 
Association (Retirement Security Plan); 
Year plan established: 1948; 
Total participants: 63,537; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.9%; 
Plan assets (actuarial assets): $4.32 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 3.9%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 6; 
Plan sponsor (Plan name): Supervalu Inc. (Supervalu Inc. Retirement 
Plan); 
Year plan established: 1976; 
Total participants: 62,802; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.9%; 
Plan assets (actuarial assets): $1.17 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.1%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 7; 
Plan sponsor (Plan name): The Cleveland Clinic Foundation (CCHS 
Retirement Plan); 
Year plan established: 1941; 
Total participants: 51,600; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.4%; 
Plan assets (actuarial assets): $0.62 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 8; 
Plan sponsor (Plan name): Gannett Co., Inc. (Gannett Retirement Plan); 
Year plan established: 1949; 
Total participants: 51,497; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.4%; 
Plan assets (actuarial assets): $1.78 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 9; 
Plan sponsor (Plan name): UPMC (UPMC Basic Retirement Plan); 
Year plan established: 1974; 
Total participants: 50,898; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.3%; 
Plan assets (actuarial assets): $0.72 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.7%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 10; 
Plan sponsor (Plan name): Continental Airlines, Inc. (The Continental 
Retirement Plan); 
Year plan established: 1988; 
Total participants: 49,608; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.3%; 
Plan assets (actuarial assets): $1.05 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.0%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 11; 
Plan sponsor (Plan name): Nationwide Mutual Insurance Company 
(Nationwide REtirement Plan); 
Year plan established: 1946; 
Total participants: 49,322; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.3%; 
Plan assets (actuarial assets): $3.49 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 3.2%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 12; 
Plan sponsor (Plan name): Ahold USA Inc. (Ahold USA Inc. Pension Plan); 
Year plan established: 1978; 
Total participants: 49,295; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.3%; 
Plan assets (actuarial assets): $0.91 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.8%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 13; 
Plan sponsor (Plan name): Pentegra DB Plan for Financial Inst. 
(Pentegra Defined Benefit Plan for Financial Inst.); 
Year plan established: 1943; 
Total participants: 41,378; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.9%; 
Plan assets (actuarial assets): $2.05 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.9%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 14; 
Plan sponsor (Plan name): Sutter Health (Sutter Health Retirement 
Plan); 
Year plan established: 1959; 
Total participants: 40,238; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.8%; 
Plan assets (actuarial assets): $1.36 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.2%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 15; 
Plan sponsor (Plan name): Time Warner Inc. (Time Warner Pension Plan); 
Year plan established: 1943; 
Total participants: 36,907; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.7%; 
Plan assets (actuarial assets): $1.71 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 16; 
Plan sponsor (Plan name): United Benefits Group (Co-op Retirement 
Plan); 
Year plan established: 1946; 
Total participants: 34,025; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.6%; 
Plan assets (actuarial assets): $0.93 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.8%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 17; 
Plan sponsor (Plan name): Xerox Corporation (Xerox Corporation 
Retirement Income Guarantee Plan); 
Year plan established: 1977; 
Total participants: 33,980; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.6%; 
Plan assets (actuarial assets): $1.33 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.2%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 18; 
Plan sponsor (Plan name): Dana Limited (Dana Retirement Plan); 
Year plan established: 1942; 
Total participants: 33,067; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.5%; 
Plan assets (actuarial assets): $1.11 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.0%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 19; 
Plan sponsor (Plan name): Thomson Reuters Holdings Inc. (Thomson 
Reuters Group Pension Plan); 
Year plan established: 1971; 
Total participants: 32,268; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.5%; 
Plan assets (actuarial assets): $1.34 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.2%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 20; 
Plan sponsor (Plan name): Citizens Financial Group, Inc. (RBS Americas 
Pension Plan); 
Year plan established: 1961; 
Total participants: 30,892; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.4%; 
Plan assets (actuarial assets): $0.88 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.8%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 21; 
Plan sponsor (Plan name): Cargill, Incorporated (Cargill, Inc. and 
Associated Companies Salaried Employees Pension Plan); 
Year plan established: 1955; 
Total participants: 29,828; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.4%; 
Plan assets (actuarial assets): $1.04 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.9%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 22; 
Plan sponsor (Plan name): John Hancock Financial Services, Inc. (John 
Hancock Pension Plan); 
Year plan established: 1960; 
Total participants: 27,133; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.2%; 
Plan assets (actuarial assets): $1.79 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 23; 
Plan sponsor (Plan name): Meadwestvaco Corporation (MWV Corporation 
Retirement Plan for Salaried and non-bargained Hourly Employees); 
Year plan established: 1944; 
Total participants: 24,145; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.1%; 
Plan assets (actuarial assets): $1.6 billion2; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 24; 
Plan sponsor (Plan name): Robert Bosch LLC (Bosch Pension Plan); 
Year plan established: 1963; 
Total participants: 22,899; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.0%; 
Plan assets (actuarial assets): $0.83 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.7%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 25; 
Plan sponsor (Plan name): Babcock & Wilcox Technical Services Y-12, 
LLC (Retirement Program Plan for Employees of Certain Employers at the 
U.S. Department of Energy Facilities at Oak Ridge, TN); 
Year plan established: 2000; 
Total participants: 19,408; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.9%; 
Plan assets (actuarial assets): $2.72 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 2.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Totals; 
Total participants: 1,570,342; 
Percentage of all defined benefit MEP participants represented by 
plan: 71.8%; 
Plan assets (actuarial assets): $83.7 billion; 
Percentage of DB MEP (actuarial) assets represented by plan: 75.8%. 

Source: GAO analysis of 2009 Form 5500 data as well as 2011 Global 
Fortune 500 and 2011 Fortune 500 data. 

[End of figure] 

Figure 4: Top 25 Plan Sponsors of Defined Contribution MEPs, as 
Measured by Total Plan Participants, 2009: 

[Refer to PDF for image: table] 

Rank: 1; 
Babcock & Wilcox Technical Services Y-12, Target Corporation (Target 
Corporation 401(k) Plan); 
Year plan established: 1967; 
Total participants: 276,763; 
Percentage of all defined benefit MEP participants represented by 
plan: 6.1%; 
Plan assets (actuarial assets): $4.8; 
Percentage of DB MEP (actuarial) assets represented by plan: 2.7%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 2; 
Babcock & Wilcox Technical Services Y-12, General Electric Company (GE 
Savings and Security Program); 
Year plan established: 1958; 
Total participants: 263,098; 
Percentage of all defined benefit MEP participants represented by 
plan: 5.8%; 
Plan assets (actuarial assets): $17.3; 
Percentage of DB MEP (actuarial) assets represented by plan: 9.9%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 3; 
Babcock & Wilcox Technical Services Y-12, ADP Total Source Group, Inc. 
(ADP Total Source Retirement Savings Plan); 
Year plan established: 1988; 
Total participants: 149,393; 
Percentage of all defined benefit MEP participants represented by 
plan: 3.3%; 
Plan assets (actuarial assets): $1.1; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 4; 
Babcock & Wilcox Technical Services Y-12, Siemens Corporation (Siemens 
Savings Plan); 
Year plan established: 1980; 
Total participants: 100,353; 
Percentage of all defined benefit MEP participants represented by 
plan: 2.2%; 
Plan assets (actuarial assets): $6.9; 
Percentage of DB MEP (actuarial) assets represented by plan: 3.9%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 5; 
Babcock & Wilcox Technical Services Y-12, FirstGroup America, Inc. 
(FirstGroup America, Inc. Retirement Savings Plan); 
Year plan established: 2009; 
Total participants: 75,608; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.7%; 
Plan assets (actuarial assets): $0.2; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.1%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 6; 
Babcock & Wilcox Technical Services Y-12, Young Men's Christian 
Association Retirement Fund (Young Men's Christian Association 
Retirement Fund Retirement Plan); 
Year plan established: 1922; 
Total participants: 72,948; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.6%; 
Plan assets (actuarial assets): $3.0; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.7%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 7; 
Babcock & Wilcox Technical Services Y-12, Microsoft Corporation 
(Microsoft Corporation Savings Plus 401(k) Plan); 
Year plan established: 1987; 
Total participants: 69,207; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.5%; 
Plan assets (actuarial assets): $5.9; 
Percentage of DB MEP (actuarial) assets represented by plan: 3.4%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 8; 
Babcock & Wilcox Technical Services Y-12, National Rural Electric 
Cooperative Association (401(k) Pension Plan); 
Year plan established: 1967; 
Total participants: 68,964; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.5%; 
Plan assets (actuarial assets): $4.5; 
Percentage of DB MEP (actuarial) assets represented by plan: 2.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 9; 
Babcock & Wilcox Technical Services Y-12, Computer Sciences 
Corporation (Computer Sciences Corporation Matched Asset Plan); 
Year plan established: 1967; 
Total participants: 62,947; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.4%; 
Plan assets (actuarial assets): $2.9; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 10; 
Babcock & Wilcox Technical Services Y-12, American International 
Group, Inc. (American International Group, Inc. Incentive Savings 
Plan); 
Year plan established: 1985; 
Total participants: 62,681; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.4%; 
Plan assets (actuarial assets): $2.8; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 11; 
Babcock & Wilcox Technical Services Y-12, Ahold USA Inc. (Ahold USA 
Inc. Pension Plan); 
Year plan established: 1968; 
Total participants: 53,765; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.2%; 
Plan assets (actuarial assets): $0.8; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 12; 
Babcock & Wilcox Technical Services Y-12, UPMC (UPMC 401(a) Retirement 
Savings Plan); 
Year plan established: 1996; 
Total participants: 51,284; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.1%; 
Plan assets (actuarial assets): $0.7; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.4%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 13; 
Babcock & Wilcox Technical Services Y-12, Quest Diagnostics 
Incorporated(The Profit Sharing Plan of Quest Diagnostics 
Incorporated); 
Year plan established: 1973; 
Total participants: 49,359; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.1%; 
Plan assets (actuarial assets): $2.3; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.3%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 14; 
Babcock & Wilcox Technical Services Y-12, Xerox Corporation (Xerox 
Corporation Savings Plan); 
Year plan established: 1945; 
Total participants: 48,155; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.1%; 
Plan assets (actuarial assets): $4.1; 
Percentage of DB MEP (actuarial) assets represented by plan: 2.3%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 15; 
Babcock & Wilcox Technical Services Y-12, The Cleveland Clinic 
Foundation (The Cleveland Clinic Health System Savings and Investment 
Plan); 
Year plan established: 1971; 
Total participants: 48,057; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.1%; 
Plan assets (actuarial assets): $1.7; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.0%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 16; 
Babcock & Wilcox Technical Services Y-12, Nationwide Mutual Insurance 
Company (Nationwide Savings Plan); 
Year plan established: 1968; 
Total participants: 45,783; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.0%; 
Plan assets (actuarial assets): $2.9; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.6%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 17; 
Babcock & Wilcox Technical Services Y-12, Time Warner Inc. (Time 
Warner Savings Plan); 
Year plan established: 1977; 
Total participants: 43,286; 
Percentage of all defined benefit MEP participants represented by 
plan: 1.0%; 
Plan assets (actuarial assets): $3.3; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.9%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 18; 
Babcock & Wilcox Technical Services Y-12, Hilton Worldwide, Inc. 
(Hilton Hotels 401(k) Savings Plan); 
Year plan established: 1979; 
Total participants: 42,974; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.9%; 
Plan assets (actuarial assets): $0.7; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.4%; 

Rank: 19; 
Babcock & Wilcox Technical Services Y-12, Exxon Mobil Corporation 
(Exxonmobil Savings Plan); 
Year plan established: 1961; 
Total participants: 42,538; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.9%; 
Plan assets (actuarial assets): $18.1; 
Percentage of DB MEP (actuarial) assets represented by plan: 10.3%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 20; 
Babcock & Wilcox Technical Services Y-12, MGM Mirage (The MGM Mirage 
401(k) Savings Plan); 
Year plan established: 1993; 
Total participants: 40,178; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.9%; 
Plan assets (actuarial assets): $0.8; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 21; 
Babcock & Wilcox Technical Services Y-12, Gannett Co., Inc. (The 
Gannett 401(k) Savings Plan); 
Year plan established: 1990; 
Total participants: 39,221; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.9%; 
Plan assets (actuarial assets): $1.2; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.7%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 22; 
Babcock & Wilcox Technical Services Y-12, UPMC (UPMC 403(b) Retirement 
Savings Plan); 
Year plan established: 1967; 
Total participants: 39,025; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.9%; 
Plan assets (actuarial assets): $0.8; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 23; 
Babcock & Wilcox Technical Services Y-12, Barnes & Noble, Inc. (Barnes 
& Noble, Inc. 401(k) Savings Plan); 
Year plan established: 1987; 
Total participants: 34,559; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.8%; 
Plan assets (actuarial assets): $0.3; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.2%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Rank: 24; 
Babcock & Wilcox Technical Services Y-12, Gevity HR Inc (Gevity 401K 
Plan); 
Year plan established: 2003; 
Total participants: 31,993; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.7%; 
Plan assets (actuarial assets): $0.2; 
Percentage of DB MEP (actuarial) assets represented by plan: 0.1%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: No. 

Rank: 25; 
Babcock & Wilcox Technical Services Y-12, Novartis Pharmaceuticals 
Corporation (Novartis Pharmaceuticals Corporation Investment Savings 
Plan); 
Year plan established: 1967; 
Total participants: 28,851; 
Percentage of all defined benefit MEP participants represented by 
plan: 0.6%; 
Plan assets (actuarial assets): $2.7; 
Percentage of DB MEP (actuarial) assets represented by plan: 1.5%; 
Sponsor or sponsor subsidiary is among 2001 Global/Fortune 500: Yes. 

Totals; 
Total participants: 1,849,186; 
Percentage of all defined benefit MEP participants represented by 
plan: 40.5%; 
Plan assets (actuarial assets): $90.0; 
Percentage of DB MEP (actuarial) assets represented by plan: 51.3%. 

Source: GAO analysis of 2009 Form 5500 data as well as 2011 Global 
Fortune 500 and 2011 Fortune 500 data. 

[End of figure] 

Table 1: Percentage of Defined Benefit MEPs, by Reported Funding 
Method, 2009: 

Post-1988 funding method; 
Percent of defined benefit MEPs: 37.2%. 

Pre-1989 funding method; 
Percent of defined benefit MEPs: 59.1&. 

Source: GAO analysis of 2009 Form 5500 data. 

Note: If the "post-1988 funding method" is filed for a defined benefit 
MEP, the plan is funded as if each employer maintains a separate plan. 
This funding method is required for plans established after December 
31, 1988, or, if the plan was established earlier, those plans which 
made a one-time election (some time after November 10, 1988, but 
before November 11, 1990) to fund as if each employer maintains a 
separate plan. If "pre-1989 funding method" is filed for a MEP, the 
plan is funded as if all participants were employed by a single 
employer. Values may not add to 100 percent as some plans do not 
specify the above funding method. 

[End of table] 

Table 2: Total Plan Assets of MEPs, by Plan Type and Plan Year: 

Defined benefit plans: 
2001: $113.8 billion; 
2009: $110.5 billion; 
2001-2009 change: -3%. 

Defined contribution plans: 
2001: $150.2 billion; 
2009: $175.4 billion; 
2001-2009 change: 17%. 

Source: GAO analysis of 2009 and 2001 Form 5500 data. 

Note: Defined benefit plan assets are the actuarial value of assets. 
The measurement of this reported value of assets changed as a result 
of the Pension Protection Act of 2006. Pub. L. No.109-280, § 102, 120 
Stat. 780, 789-809. As a result these measures may be different over 
time. Defined contribution plan assets are the end-of-year total 
assets reported on either the Form 5500 schedule H (for large plans), 
schedule I (for small plans), or the Form 5500-SF (for certain small 
plans). 

[End of table] 

Table 3: Percentage of All Assets Represented by MEPs, by Plan Type 
and Plan Year: 

Defined benefit plans; 
2001: 6.5%; 
2009: 5.6%; 
2001-2009 change: -14%. 

Defined contribution plans; 
2001: 9.1%; 
2009: 5.6%; 
2001-2009 change: -39%. 

Source: GAO analysis of 2001 Form 5500 data. 

[End of table] 

Table 4: MEP Participating Employer Estimates, Mean, Median and 
Maximum Employers, 2001: 

Defined benefit plans: 
Mean number of participating employers associated with MEPs, by plan 
type, 2001: 16; 
Median number of participating employers associated with MEPs, by plan 
type, 2001: 2; 
Maximum number of participating employers associated with MEPs, by 
plan type, 2001: 862. 

Defined contribution plans: 
Mean number of participating employers associated with MEPs, by plan 
type, 2001: 9; 
Median number of participating employers associated with MEPs, by plan 
type, 2001: 2; 
Maximum number of participating employers associated with MEPs, by 
plan type, 2001: 999. 

Source: GAO analysis of 2001 Form 5500 data. 

Note: Under a MEP, some qualification requirements are applied as if 
all employees of each employer are employed by a single employer 
(e.g., 26 U.S.C. §§ 401(a) (exclusive benefit), 410(a) 
(participation), and 411 (vesting)). 26 U.S.C. 413(c)(1)-(3). Prior to 
2004, certain plans would file a Schedule T to substantiate compliance 
with minimum coverage requirements. For purposes of Schedule T, each 
controlled group and each other employer that have employees 
benefiting under a plan that benefits the employees of more than one 
employer are referred to as "participating employers." Up until 2004, 
the schedule T was only required every third year for certain 
employers, while other employers were to file it annually. Thus, these 
figures are estimates of a sample of MEPs for 2001. There were 3,307 
(or 87 percent of the total of 3,796 identified) MEP defined 
contribution plans and 388 (or 81 percent of the total 478 identified) 
MEP defined benefit plans that filed a Schedule T in 2001. 
Additionally, employers reporting only one participating employer are 
assumed to not have a reporting requirement for 2001. 

[End of table] 

Figure 5: Percentage of MEPs by Range of Participating Employers in 
the Plan, 2001 Estimate: 

[Refer to PDF for image: vertical bar graph] 

Percentage of multiple employer pan type: 

Range of participating employers: 2; 
Defined benefit: 51.8%; 
Defined contribution: 51.3%. 

Range of participating employers: 3 to 5; 
Defined benefit: 26.5%; 
Defined contribution: 29.8%. 

Range of participating employers: 6 to 9; 
Defined benefit: 5.9%; 
Defined contribution: 7.8%. 

Range of participating employers: 10 to 19; 
Defined benefit: 5.5%; 
Defined contribution: 4.9%. 

Range of participating employers: 20 to 49; 
Defined benefit: 5.5%; 
Defined contribution: 3.9%. 

Range of participating employers: 50 or more; 
Defined benefit: 4.7%; 
Defined contribution: 2.2%. 

Source: GAO analysis of 2001 Form 5500 data. 

Note: Data reflects only those that reported two or more participating 
employers. Those MEP sponsors that did not file participating employer 
reports, also known as the Schedule T attachment to the Form 5500, are 
not shown. Additionally, employers reporting only one participating 
employer are assumed to not have a reporting requirement for 2001. 

[End of figure] 

Table 5: Maximum Number of Participants and Percentage of Participants 
in MEPs by Sponsor Industry and by Plan Type, 2009: 

Defined benefit plans: 
Sponsor industry: Other Electrical Equipment & Component Manufacturing; 
Participants: 547,129; 
Participants as percentage of all MEP participants: 25.0%. 

Defined contribution plans: 
Sponsor industry: Hospitals; 
Participants: 290,855; 
Participants as percentage of all MEP participants: 6.4%. 

Source: GAO analysis of 2009 Form 5500 data. 

[End of table] 

Table 6: Maximum Number of MEPs and Percentage of MEPs by Sponsor 
Industry and by Plan Type, 2009: 

Defined benefit plans: 
Sponsor industry: Religious, Grantmaking, Civic, Professional, & 
Similar Organizations; 
Plans: 44; 
Plans as a percentage of all MEPs: 13.8%. 

Defined contribution plans: 
Sponsor industry: Offices of Physicians (except mental health 
specialists); 
Plans: 282; 
Plans as a percentage of all MEPs: 6.1%. 

Source: GAO analysis of 2009 Form 5500 data. 

[End of table] 

Table 7: Percentage of Benefit Types Represented within Each Defined 
Benefit Plan Type, 2009: 

Hybrid/cash balance; 
Multiple employer: 16.0%; 
Single employer: 14.7%; 
Multiemployer: 1.6%. 

Other/undefined defined benefit plan; 
Multiple employer: 1.9%; 
Single employer: 2.6%; 
Multiemployer: 10.3%. 

Primarily flat dollar benefits; 
Multiple employer: 6.9%; 
Single employer: 8.1%; 
Multiemployer: 66.1%. 

Primarily pay related benefits; 
Multiple employer: 75.2%; 
Single employer: 74.6%; 
Multiemployer: 22.0%. 

Source: GAO analysis of 2009 Form 5500 data. 

[End of table] 

Table 8: Percentage of Pension Feature Types Represented within Each 
Defined Contribution Plan Type, 2009: 

401k plan; 
Multiple employer: 87.0%; 
Single employer: 76.6%; 
Multiemployer: 28.8%. 

Profit sharing plan; 
Multiple employer: 9.1%; 
Single employer: 17.3%; 
Multiemployer: 25.6%. 

Stock bonus plan; 
Multiple employer: 0.2%; 
Single employer: 0.7%; 
Multiemployer: 0.5%. 

Target benefit plan; 
Multiple employer: 0.2%; 
Single employer: 0.1%; 
Multiemployer: 0.5%. 

Money purchase plans; 
Multiple employer: 2.0%; 
Single employer: 2.4%; 
Multiemployer: 38.2%. 

Annuity-403(b)(7); 
Multiple employer: 1.1%; 
Single employer: 2.6%; 
Multiemployer: 2.5%. 

Custodial account-403(b)(7); 
Multiple employer: 0.1%; 
Single employer: 0.1%; 
Multiemployer: 0.0. 

Other defined contribution; 
Multiple employer: 0.3%; 
Single employer: 0.2%; 
Multiemployer: 3.8%. 

Source: GAO analysis of 2009 Form 5500 data. 

Note: Defined contribution plan features generally follow the order of 
the feature categories assigned in Labor's Private Pension Plan 
Bulletins Abstract of Form 5500 Annual Reports. Although a plan may 
list multiple defined contribution pension plan features, we assign 
such plans to only one pension feature code from the above list--
giving primacy to the codes in order of the above listing. For 
example, a plan could list both a 401(k) plan feature along with a 
stock bonus plan feature; however we list it as a 401(k) plan because 
the 401(k) plan feature is the primary listing above. Alternatively, 
"other defined contribution" is assigned last in the list and thus 
"other defined contribution" includes no plan features that are listed 
above it. 

[End of table] 

Table 9: Percentage of Defined Contribution Plans by Single, Multiple, 
and Multiemployer Plan Status by Range of Plan Participants, 2009: 

MEP; 
10,000 or more participants: 1.5%; 
5,000-9,999 participants: 1.5%; 
1,000-4,999 participants: 8.9%; 
100-999 participants: 34.6%; 
less than 100 participants: 53.4%. 

Single-employer plan; 
10,000 or more participants: 0.1%; 
5,000-9,999 participants: 0.1%; 
1,000-4,999 participants: 0.9%; 
100-999 participants: 9.1%; 
less than 100 participants: 89.7%. 

Multiemployer plan; 
10,000 or more participants: 4.8%; 
5,000-9,999 participants: 6.5%; 
1,000-4,999 participants: 32.1%; 
100-999 participants: 39.2%; 
less than 100 participants: 17.3%. 

Source: GAO analysis of 2009 Form 5500 data. 

[End of table] 

Table 10: Percentage of Defined Benefit Plans by Single, Multiple and 
Multiemployer Plan Status by Range of Plan Participants, 2009: 

MEP; 
10,000 or more participants: 10.5%; 
5,000-9,999 participants: 7.5%; 
1,000-4,999 participants: 19.9%; 
100-999 participants: 35.6%; 
less than 100 participants: 26.6%. 

Single-employer plan; 
10,000 or more participants: 0.8%; 
5,000-9,999 participants: 0.8%; 
1,000-4,999 participants: 4.4%; 
100-999 participants: 13.8%; 
less than 100 participants: 80.1%. 

Multiemployer plan; 
10,000 or more participants: 12.4%; 
5,000-9,999 participants: 8.0%; 
1,000-4,999 participants: 39.6%; 
100-999 participants: 37.7%; 
less than 100 participants: 2.2%. 

Source: GAO analysis of 2009 Form 5500 data. 

[End of table] 

[End of section] 

Appendix II: Comments from the Department of Labor: 

U.S. Department of Labor: 
Assistant Secretary for Employee Benefits Security Administration: 
Washington, D.C. 20210: 

August 27, 2012: 

Mr. Charles A. Jeszeck: 
Director, Education, Workforce, and Income Security Issues: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Jeszeck: 

Thank you for the opportunity to review the Government Accountability 
Office's (GAO) draft report entitled "Private Sector Pensions: Federal 
Agencies Should Collect Data and Coordinate Oversight of Multiple 
Employer Plans." We appreciate GAO's effort to evaluate the 
characteristics and status of different types of "multiple employer 
plans" (MEPs) under the Employee Retirement Income Security Act 
(ERISA) and the Internal Revenue Code (Code). 

The draft Report recommends that the Department of Labor (Department) 
gather oversight information about the employers that participate in 
multiple employer plans. One obvious way to do this would be to revise 
the Form 5500 reporting requirements to include a requirement that a 
MEP disclose basic identifying information regarding the employers 
that participate in a MEP, such as the number of participating 
employers or a list of the participating employers. The Department, 
Internal Revenue Service (IRS) and Pension Benefit Guaranty 
Corporation (PBGC) developed the Form 5500 return/report as a three-
agency form for plan administrators, employers, and others to use to 
satisfy various annual reporting obligations under ERISA and the Code. 
Given the importance of the Form 5500 information and data, the 
Department, IRS, and PBGC regularly evaluate possible changes to the 
Form 5500. As part of that evaluation process, we will have the 
opportunity to consider the merits of alternative methods of 
collecting additional data about employers that participate in MEPs, 
among other possible changes to the Form 5500. 

The draft Report also recommends that EBSA and the IRS modify an 
existing coordination agreement to provide for coordination of the 
statutory interpretations reflected in the Department's recent 
advisory opinions related to open MEPs and develop compliance-related 
guidance on the establishment and operation of MEPs under ERISA and 
the Code. The draft Report describes two recent advisory opinions that 
the Department issued regarding open MEPs: ERISA Advisory Opinions 
2012-03A and 2012-04A. The legal question we answered in the advisory 
opinions is whether particular "open" arrangements should be treated 
under ERISA as one "multiple employer plan" as the promoters 
maintained or, as we concluded as a legal matter under Title I of 
ERISA, as a collection of single employer plans sponsored by each 
adopting employer. As your draft Report describes, the Department has 
long recognized that various types of multiple employer plan 
structures may constitute a single plan under ERISA if there is a 
sufficient connection among the employers separate and apart from 
their participation in the MEP. In contrast, in an "open" MEP the only 
nexus among the employers typically is the purchase of the MEP 
coverage. 

The Department is committed to working together with the Treasury 
Department and the IRS in accordance with section 3004 of ERISA and 
with the PBGC. In the case of our recently issued advisory opinions on 
how ERISA section 3(2)'s definition of employee pension benefit plan 
and related ERISA provisions apply to open MEPs, the draft Report (on 
page 21) states that "Labor and IRS have not coordinated with regard 
to Labor's advisory opinions related to MEPs." The Department, 
however, did consult with the Treasury Department, the IRS and the 
PBGC on more than one occasion prior to the issuance of the opinions. 
We shared drafts of the advisory opinions with those agencies and the 
Department made adjustments in the text in response to comments from 
those agencies. After the advisory opinions were issued, the agencies 
discussed issues arising under the opinions. 

With respect to the need to modify existing formal coordination 
agreements, we do not believe that it is necessary to make any changes 
in those agreements to reflect the advisory opinions at this time. The 
draft Report notes that Treasury has concluded that it is premature to 
make decisions on changes in IRS's determination letter practices 
until there has been an opportunity to analyze the full impact of the 
advisory opinions on open MEP practices, and until that occurs it is 
premature to make decisions on the need for formal coordination 
agreements in this area. Nonetheless, EBSA intends to and will 
continue to consult and coordinate with IRS, Treasury and the PBGC on 
compliance and policy matters relating to MEPs, and with respect to open
MEPs in particular. To the extent that compliance issues become more 
apparent,[Footnote 1] or further analysis of the impact of the 
advisory opinions indicates that a formal coordination agreement on 
statutory requirements applicable to open MEPs under ERISA and the 
Code may be helpful, the agencies will amend the coordination 
agreements accordingly. 

The Department strongly supports efforts to expand the availability of 
retirement plan coverage to America's working men and women through 
their employer, especially in the small business sector. In doing so, 
however, it is essential that ERISA's protections for workers, 
retirees and their families be maintained in the context of an open 
MEP. Promoters are marketing these products to small employers as a 
way for the employer to offer a low cost pension plan, and some are 
falsely claiming the employers will have no ERISA reporting or 
fiduciary obligations if they sign up for an open MEP. A significant 
concern we have with open MEP arrangements is that the lack of direct 
employer involvement in the oversight of these products may make them 
more susceptible to abuse. 

We appreciate having had the opportunity to review and comment on the 
draft Report. Please do not hesitate to contact us if you have 
questions concerning this response or if we can be of further 
assistance. 

Sincerely, 

Signed by: 

[Illegible] for: 

Phyllis C. Borzi: 
Assistant Secretary: 

Appendix II Footnote: 

1. For example, in the case of the many traditional multiple employer 
plan arrangements that have been operating for years under both ERISA 
and the Code, it is unclear what compliance issues exist that require 
special coordination. 

[End of section] 

Appendix III: Comments from the Department of the Treasury: 

DEPARTMENT OF THE TREASURY: 
WASHINGTON, D.C. 20220: 

August 27, 2012: 

Mr. Charles A. Jeszeck: 
Director, Education, Workforce, and Income Security: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Jeszeck: 

Thank you for the opportunity to review the Government Accountability 
Office's (GAO) draft report entitled "Private Sector Pensions: Federal 
Agencies Should Collect Data and Coordinate Oversight of Multiple 
Employer Plans." We appreciate GAO's effort to evaluate the 
characteristics and status of different types of "multiple employer 
plans" (MEPs) under the Employee Retirement Income Security Act 
(ERISA) and the Internal Revenue Code (Code). 

The draft Report recommends that the Department of Labor (DOL) gather 
oversight information about the employers that participate in multiple 
employer plans. One obvious way to do this would be to revise the Form 
5500 reporting requirements to include a requirement that a MEP 
disclose basic identifying information regarding the employers that 
participate in a MEP, such as the number of participating employers or 
a list of the participating employers. DOL, the Internal Revenue 
Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC) 
developed the Form 5500 return/report as a three-agency form for plan 
administrators, employers, and others to use to satisfy various annual 
reporting obligations under ERISA and the Code. Given the importance 
of the Form 5500 information and data, DOL, IRS, and PBGC regularly 
evaluate possible changes to the Form 5500. As part of that evaluation 
process, we will have the opportunity to consider the merits of 
alternative methods of collecting additional data about employers that 
participate in MEPs, among other possible changes to the Form 5500. 

The draft Report also recommends that EBSA (the DOL division with the 
mission of assuring the security of the retirement, health and other 
workplace related benefits of America's workers and their families) 
and the IRS modify an existing coordination agreement to provide for 
coordination of the statutory interpretations reflected in DOL's 
recent advisory opinions related to MEPs[Footnote 1] and coordinate to 
develop compliance-related guidance on the establishment and operation 
of MEPs under ERISA and the Code. 

The Treasury Department and the IRS are committed to coordination with 
DOL in accordance with section 3004 of ERISA and with the PBGC. In the 
case of DOL's recently issued advisory opinions regarding how the 
ERISA section 3(2) definition of employee benefit plan and related 
ERISA definitions apply to an open MEP, the draft Report (on page 21) 
states that "Labor and IRS have not coordinated with regard to Labor's 
advisory opinions related to MEPs." As noted in DOL's letter to GAO, 
DOL did consult with us and the PBGC on more than one occasion prior 
to the issuance of the opinions. After the advisory opinions were 
issued, the agencies discussed issues arising under the opinions. 

With respect to the need to modify existing formal coordination 
agreements, we do not believe that it is necessary to make any changes 
in those agreements to reflect the advisory opinions at this time. We 
believe that it is premature to make decisions on changes in the 
determination letter practices until there has been an opportunity to 
analyze the full impact of the advisory opinions on open MEP 
practices, and that no changes in the formal coordination agreements 
in this area should be made until after that analysis is complete. 
Nonetheless, we intend to continue to consult and coordinate with DOL 
and PBGC on compliance and policy matters relating to MEPs, and with 
respect to open MEPs in particular. To the extent that compliance 
issues become more apparent,[Footnote 2] or further analysis of the 
impact of the advisory opinions indicates that a formal coordination 
agreement on statutory requirements applicable to open MEPs under 
ERISA and the Code may be helpful, the agencies will amend the 
coordination agreements accordingly. 

As noted in the draft Report (on page 21), the statutory rules with 
respect to MEPs are different under ERISA and the Code. Most 
significantly, section 413(c) of the Code (which, in coordination with 
other tax qualification rules set out in Code section 401, et seq., 
governs the tax treatment of MEPs) does not incorporate the ERISA 
section 3(2) definition of an employee benefit plan. Although DOL, in 
its advisory opinions, has limited the ability of particular open
MEP arrangements to constitute a single employee benefit plan under 
ERISA based on the ERISA definition of an employee benefit plan and 
related ERISA provisions, it is not clear that the same analysis can 
or should be applied under the Code. Accordingly, even as the agencies 
continue to work together to develop and communicate to the benefits 
community compliance-related guidance on the establishment and 
operation of MEPs, different analyses may continue to apply under 
ERISA and the Code. 

The Treasury Department and the IRS are committed to expanding 
retirement plan coverage and protecting the retirement benefits of 
workers, retirees, and their families and we appreciate having had the 
opportunity to review and comment on the draft Report. Please do not 
hesitate to contact us if you have questions concerning this response 
or if we can be of further assistance. 

Sincerely, 

Signed by: 

J. Mark Irwy: 
Senior Advisor to the Secretary and Deputy Assists Secretary 
(Retirement and Health Policy): 

Appendix III Footnotes: 

1. The draft Report describes two recent advisory opinions that the 
DOL issued regarding open MEPs — ERISA Advisory Opinion Nos. 2012-03A 
and 2012-04A. 

2. For example, in the case of the many traditional multiple employer 
plan arrangements that have been operating for many years under both 
ERISA and the Code, it is unclear what compliance issues exist that 
require special coordination efforts. 

[End of section] 

Appendix IV: Comments from the Pension Benefit Guaranty Corporation: 

PBGC: 
Pension Benefit Guaranty Corporation: 
Office of the Director: 
1200 K Street, N.W. 
Washington. D.C 20005-4026: 

August 27, 2012: 

Mr. Charles A. Jeszeck:
Director, Education, Workforce, and Income Security:  
United States Government Accountability Office:  
Washington. DC 20548:  

Dear Mr. Jeszeck:  

We appreciate the opportunity to comment on the draft version of your 
report on multiple-employer plans. PBGC covers about 300 multiple-
employer plans (MEPs). We are committed to expanding retirement 
plan coverage and protecting the retirement benefits of workers, 
retirees, and their families. We therefore hope that GAO continues to 
focus on these important issues and to lend its expertise.  

Like the other ERISA agencies, we do not believe there is an absence 
of discussion or coordination among the agencies. PBGC has consulted 
and coordinated with the other agencies on multiple-employer plan 
matters, including the recent DOL ERISA Advisory Opinions (2012-3A and 
2012-4A) and possible regulatory approaches and safeguards, and 
expects that to continue. And like the other agencies, we agree 
that as part of the regular evaluation of possible changes to the Form 
5500, we will have the opportunity to consider the merits of 
alternative methods of collecting additional data about employers that 
participate in MEPs, among other possible changes.  

The draft Report (on page 21) notes that the statutory rules with 
respect to MEPs are different under Title I of ERISA and the Code. The 
report should also note the statutory rules under Title IV of ERISA. As 
detailed further in technical comments provided to your staff, ERISA 
II§ 4063 and 4064 require employers to bear a fair share of the plan's 
underfunding on termination and to post security upon withdrawal. A 
PBGC regulation, 29 C.F.R. § 4001.2, defines multiple-employer plans 
for Title IV purposes. In administering these provisions, PBGC has not 
restricted the definition of a multiple-employer plan based on 
employer affiliation. Accordingly, different analyses may continue to 
apply under Title I of ERISA, the Code, and Title IV of ERISA.  

These are difficult but very important issues. It was entirely 
appropriate that the Chairman of the Senate Committee on Health, 
Education, Labor and Pensions asked GAO to evaluate them. We would 
welcome the opportunity to be of further assistance.  

Sincerely, 

Signed by: 

Joshua Gotbaum: 
Director: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Charles Jeszeck, (202) 512-7215 or jeszeckc@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Patrick DiBattista, Assistant 
Director; Chuck Ford; Ted Leslie; David Reed; Craig Winslow; and Frank 
Todisco made key contributions to this report. Also contributing to 
this report were Amy Anderson, David Chrisinger, Mimi Nguyen, Jodi 
Munson-Rodriguez, Roger Thomas, and Paul Wright. 

[End of section] 

Footnotes: 

[1] GAO, Private Pensions: Better Agency Coordination Could Help Small 
Employers Address Challenges to Plan Sponsorship, [hyperlink, 
http://www.gao.gov/products/GAO-12-326] (Washington, D.C.: Mar. 5, 
2012). 

[2] Although the term MEP can be used to refer to employee welfare 
benefit plans as well as employee pension benefit plans, in this 
report, we use that term to refer only to employee pension benefit 
plans or arrangements that purport to be employee pension benefit 
plans. 

[3] The Employee Retirement Income Security Act of 1974 (ERISA) 
establishes requirements for employee benefit plans Pub. L. No. 93-
406, 88 Stat. 829 (codified as amended at 26 U.S.C §§ 219, 401-404, 
405-408, 910-915, 1379, 4971, 4973-4975, 6057-6059, 6103, 6104, 6688, 
6690, 6692 and 7802; 29 U.S.C. §§ 1001-1461; and 42 U.S.C. § 1131). 
Labor, IRS and PBGC jointly developed the Form 5500 so employee 
benefit plans could utilize it to satisfy annual reporting 
requirements under ERISA and the Internal Revenue Code (IRC). The Form 
5500 is part of ERISA's overall reporting and disclosure framework, 
helping to assure that employee benefit plans are operated and managed 
in accordance with certain prescribed standards and that participants 
and beneficiaries, as well as regulators, are provided or have access 
to sufficient information to protect the rights and benefits of plan 
participants and beneficiaries. 

[4] A PEO, very generally, is a firm that provides a means for 
outsourcing of various human resource management and administration 
tasks for client employers. 

[5] Where possible, we selected and interviewed sponsors that offered 
both defined benefit and defined contribution MEPs. However, some of 
the sponsor types offered only defined contribution MEPs. 

[6] These experts included a representative of a pension consumer 
rights organization; a representative of a nonprofit, nonpartisan, 
retirement research organization; representatives of a private law 
firm specializing in employee benefits; representatives of a 
membership organization dedicated to retirement plan professionals; 
and the author of a book and journal article on multiple employer 
benefit arrangements. 

[7] Pub. L. No. 93-406, 88 Stat. 829. 

[8] These formulas may take into account factors such as salary, years 
of service, and age at retirement, regardless of the investment 
portfolio's performance. 

[9] 29 U.S.C. § 1002(34) and (35). 

[10] 29 U.S.C. § 1002(41) and (42). 

[11] 29 U.S.C. § 1002(37). 

[12] We have recently initiated work on multiemployer plans. The work 
is expected to examine efforts to improve multiemployer funded status 
and policy options that could facilitate such an aim. 

[13] The main parties in the master and prototype plan system are mass 
submitters, sponsors, and adopting employers, and each one is involved 
at a different "level" in the process with respect to the IRS. Mass 
submitters, or U.S. businesses that submit opinion letter applications 
on behalf of at least 30 unaffiliated sponsors, usually have reduced 
procedural requirements and get expedited treatment from the IRS 
because of the high volume of sponsors they represent and the number 
of identical or near-identical plans they submit to the IRS. This 
makes it easier and more efficient for IRS to review the large number 
of identical plans. The IRS issues opinion letters (on the 
acceptability of the form of the plan) to mass submitters and/or 
sponsors of master and prototype plans that have been submitted to the 
IRS for approval. 26 C.F.R. § 601.201(q) (2012). The master and 
prototype sponsor, or a U.S. business that has at least 30 employer-
clients each of which is reasonably expected to timely adopt the 
sponsor's basic lead plan document, then makes its plan(s) available 
for employers to adopt. 

[14] A prototype plan differs from a master plan in that it does not 
centralize, or pool, investment accounts like a master plan. A 
separate trust or custodial account is established for each employer 
in the case of a prototype plan. 

[15] ERISA Procedure 76-1 for ERISA Advisory Opinions, [hyperlink, 
http://www.dol.gov/ebsa/regs/aos/ao_requests.html]. 

[16] 26 U.S.C. §§ 401(a) and 501(a). 

[17] The IRC sets out specific requirements applicable to MEPs, 
imposing, for example, participation, exclusive benefit and vesting 
requirements. 26 U.S.C. § 413(c). 

[18] In this report we refer to the employers that participate in a 
MEP as participating employers. 

[19] This is sometimes referred to as a joinder agreement. It may also 
outline the delegation of authority necessary under the plan to permit 
a given MEP to operate. 

[20] 26 U.S.C. §§ 410(b) and 416. These requirements are often 
referred to as nondiscrimination rules and "top heavy" rules. 
Nondiscrimination testing is done to assure that benefits are provided 
to a cross-section of employees consistent with requirements intended 
to keep plans from disproportionately benefiting highly compensated 
employees and company owners or executives. 

[21] Generally, ERISA requires pension plans with 100 or more 
participants to have an audit as part of their obligation to file an 
annual return/report, known as the Form 5500. 29 U.S.C. §§ 
1023(9)(3)(A) and 1024(a)(2)(A). When an audit is required, the plan 
administrator must select an independent qualified public accountant. 
A plan audit is one way to help protect the assets and financial 
integrity of the pension plan and ensure that the necessary funds will 
be available to pay promised retirement benefits. An audit helps the 
sponsor carry out legal responsibilities to file a complete and 
accurate annual return/report for the plan each year. In addition, the 
audit serves as financial disclosure to the participants and 
beneficiaries. 

[22] Prior to 2005, certain plan sponsors used a Schedule T attachment 
to the Form 5500 to satisfy certain tax qualification requirements 
applied at the employer level. The Schedule T included fields for 
individual employer information along with data to use for 
nondiscrimination testing of employers participating in a MEP. 
However, as a result of a series of events related to electronic 
collection of data, Labor, IRS, and PBGC no longer collect this data. 
IRS officials pointed out that statute limits the collection of 
information electronically by the IRS. 26 U.S.C. § 6011(e)(1). In 1999 
Labor took over responsibility for collection of the Form 5500 and, 
along with IRS and PBGC, implemented a new computerized system known 
as the ERISA Filing Acceptance System (EFAST) to improve the 
processing of forms. Because there was no electronic filing 
requirement when EFAST was implemented, forms were mainly submitted in 
paper format. Around the late-to-mid 2000s, Labor led an effort to 
collect Form 5500 information in direct, electronic form, an 
initiative known as EFAST2. In anticipation of the changes in EFAST2, 
the IRS requested the removal of the Schedule T. The all-electronic 
system of EFAST2 was instituted as of January 2010. Labor and IRS 
officials said that, because the now-defunct Schedule T was not 
required annually and included calculations that were not necessarily 
timely, the information on participating employers was not 
particularly direct or timely. 

[23] According to the official, the agencies could change the Form 
5500 to include participating employer information after the 
department complies with the legally required steps for implementing 
regulations, including regulatory analysis and notice-and-comment 
rulemaking, as well as requirements under the Paperwork Reduction Act 
of 1995 (Pub. L. No. 104-13, 109 Stat. 163 (codified as amended at 44 
U.S.C §§ 3501-3521)) and the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. No. 104-121, tit. II 110 Stat. 847, 857-
74. Any added information would require changes to systems 
administered by Labor's contractor, with the cost of such a change 
depending on the format of the change. 

[24] For example, a MEP may include employers that have changing 
ownership interests in one another. If and when ownership interests 
with respect to two or more employers reaches certain levels set out 
in the IRC (26 U.C.S. § 1563), those employers would generally, in 
effect, be considered a single employer. 26 U.S.C. § 414(b) and (c). 
For MEPs that have a particularly large number of participating 
employers engaging in complex transactions, keeping track of the 
number and identities of participating employers may be burdensome. 

[25] While key, current information about participating employers is 
missing, we were able to identify important sponsor-level plan 
information from the 2001 and 2009 Form 5500 filings. Additionally, we 
supplemented our data analysis with data from plan interviews. 

[26] Though MEPs may follow more general pension trends in plan-type 
sponsorship, others suggest possible MEP-specific trends as well. 
Actuarial experts told us that certain requirements may make it 
particularly difficult to establish a defined benefit MEP today. 
Defined benefit MEPs established after 1988 must be funded as if each 
participating employer is funding a separate plan so that plan assets 
have to be allocated among the participating employers. 26 U.S.C. § 
413(c)(4)(A). Plans established before 1989 that did not elect to be 
treated as plans established after 1988 must be funded as if all 
participating employers maintain one single-employer plan. 26 U.S.C. § 
413(c)(4)(B). According to the experts, allocating assets across 
employers requires application of onerous, detailed allocation 
techniques that may result in certain employers receiving asset 
allocations that are disproportionate to their individual 
contributions. Disproportionate allocations may give certain 
participating employers the impression that the plan is inequitable--
that is, for example, that certain employers are contributing more to 
the funding of the plan than they would have were the plan not funded 
separately, while other participating employers may receive 
particularly favorable asset allocations. Roughly 37 percent of 
defined benefit MEPs were subject to the post-1988 funding rules as of 
the 2009 plan year. See appendix I, table 1 for additional detail. 

[27] See appendix I, tables 2 and 3 for additional asset information. 

[28] Particularly for defined contribution plans in this instance, 
plan participation implies eligibility to contribute to the plan. 
Thus, some participants may not have account balances if they have not 
made or received contributions to the plan and, given the construction 
of the definition of participant in the Form 5500, our estimates 
include participants with zero account balances. For our analysis, we 
measured participants using the definition of total participants on 
the Form 5500 and Form 5500-SF (for small plans) which includes 
active; retired; separated vested participants not yet in pay status; 
and deceased participants whose beneficiaries are receiving or are 
entitled to receive benefits. The number of participants also includes 
double counting of workers in more than one plan. 

[29] All three of the sponsors we interviewed in this category had 
both defined benefit and defined contribution MEPs. 

[30] For most purposes, all employees of employers in the same 
controlled group are treated as employed by a single employer. 26 
U.S.C. § 414(b). The status of these large, corporate plans as MEPs 
may be temporary if the transactions that resulted in them becoming 
MEPs are undone. For example, one plan sponsor representative we 
interviewed said that the sponsor's defined benefit and defined 
contribution plans became MEPs in the early-to-mid 2000s as a result 
of a merger within a business segment. Not long after, however, that 
particular segment was spun-off from the company and, by sometime in 
2012, both the defined benefit and defined contribution plans will no 
longer be MEPs, but may be single-employer plans. 

[31] The extent to which two or more corporations are considered in 
the same controlled group has to do chiefly with the percentage of 
ownership one has in the other. 26 U.S.C. § 1563. 

[32] For the purposes of identifying MEPs sponsored by association for 
this report, we found indications (e.g., terms like association, 
cooperative, farm bureau, etc.) in both the names and websites of MEP 
sponsors which we used to determine which MEPs were sponsored by 
associations. We did not assess whether these plan sponsors would meet 
Labor's definition of "bona fide" association under ERISA. All four of 
the associations from which we interviewed representatives for our 
study also sponsored both defined benefit and defined contribution 
MEPs. 

[33] We were unable to identify any PEOs that sponsored defined 
benefit MEPs, but interviewed representatives from three large PEO 
MEPs that exclusively sponsored defined contribution plans. 

[34] TriNet, also a PEO, acquired Gevity in 2009. 

[35] The NAPEO, until 1994, was known as the National Staff Leasing 
Association. 

[36] We did not find coemployer defined in federal statute and many 
states do not specifically regulate PEOs in any way. Because the term 
PEO is not well-defined either, and the actual services are 
contractually determined, some refer to certain PEO practices as 
"employee leasing" or "payrolling," which involves providing 
administrative or financial services to employers, rather than serving 
as an employer in the sense of hiring or supervising workers. 
According to the Center for a Changing Workforce, in the late 1980s 
and early 1990s, many employee leasing firms went bankrupt or were 
forced out of business due to fraud, including payroll fraud and 
mishandling of employee retirement funds. See Center for a Changing 
Workforce, PEOs and Payrolling: A History of Problems and a Future 
without Benefits (Seattle, Washington: December 2001). 

[37] Profit-sharing plans, or similarly stock bonus plans, are a type 
of defined contribution plan that give employees a share of company 
profits. More specifically, these plans are a feature of a defined 
contribution plan under which an employer may determine, annually, how 
much will be contributed to the plan out of profits or revenue. 

[38] According to our analysis, two industries associated with the 
PEOs observed marked growth with respect to both the number of defined 
contribution plans and participants from 2001 to 2009. Plan sponsors 
representing the "employment services" and "payroll services" 
industries combine to represent about 7 percent of MEPs and 10 percent 
of MEP participants. Notably, participation in plans represented by 
these industries saw a nearly three-fold increase over the 2001 to 
2009 period and represent almost one-half million MEP participants as 
of 2009. 

[39] See appendix I, table 4 and figure 5 for additional analysis of 
data we tabulated on participating employers from the 2001 Form 5500. 

[40] Rev. Proc. 2002-21, 2002 -19 I.R.B. 911. The IRS guidance 
provided relief to PEOs sponsoring plans for employees who were 
working at client worksites but paid by the PEO to provide services to 
the client pursuant to a contract. The IRC provides that an employer's 
plan may be tax-qualified only if maintained for the exclusive benefit 
of its employees. 26 U.S.C. § 401(a)(2). The revenue procedure 
specified circumstances under which a PEO could cover employees 
located at client worksites under a pension plan by establishing a MEP 
with those client employers and thereby not violating the exclusive 
benefit requirement. 

[41] This plan is known as the 401K Advantage, LLC 401K Plan. 

[42] This plan is known as the 401K Safe, LLC Multiple Employer 401(K) 
Plan. 

[43] These plans were the Benefitguard Retirement Income Security Plan 
and the National Retirement Security Cash Balance Plan. 

[44] Third-party service providers are outside professionals that may 
manage some or all of a plan's day-to-day operations. These services 
can include investment management, consulting and providing financial 
advice, record keeping, custodial or trustee services for plan assets, 
telephone or web-based customer services for participants and other 
third-party administrative services. 

[45] The advantages and disadvantages identified in this section apply 
to whenever a sponsor can establish a MEP. Later in this report, we 
discuss how Labor and IRS regulatory interpretations influence MEP 
sponsorship, particularly with respect to open MEPs. 

[46] In identifying individual alternatives to the possible advantages 
provided by MEPs, we did not assess whether these individual 
alternatives would be more appealing to an employer than the 
combination of advantages provided by MEPs. 

[47] Under ERISA, a fiduciary is anyone who exercises any 
discretionary authority or discretionary control respecting management 
of a plan or exercises any authority or control respecting its assets 
or renders investment advice for a fee or compensation to the plan or 
has authority to do so. ERISA provides that a plan's fiduciaries must 
carry out their responsibilities prudently and do so solely in the 
interest of the plan's participants and beneficiaries. 29 U.S.C. §§ 
1002(21) and 1104(a). 

[48] [hyperlink, http://www.gao.gov/products/GAO-12-326]. 

[49] In a previous report, we noted that, unlike this firm, service 
providers sometimes do not acknowledge that they are plan fiduciaries 
even though plan sponsors assume them to be. When a service provider 
is not a plan fiduciary, it is not bound by the fiduciary duty under 
ERISA to act prudently and solely in the plan's best interest. See 
GAO, Private Pensions: Fulfilling Fiduciary Obligations Can Present 
Challenges for 401(k) Plan Sponsors, [hyperlink, 
http://www.gao.gov/products/GAO-08-774] (Washington, D.C.: July 16, 
2008). 

[50] See [hyperlink, http://www.gao.gov/products/GAO-12-326]. 

[51] See [hyperlink, http://www.gao.gov/products/GAO-12-326]. 

[52] See [hyperlink, http://www.gao.gov/products/GAO-12-326]. 

[53] See [hyperlink, http://www.gao.gov/products/GAO-12-326]. 

[54] As an illustration of the potential risk, an individual acting as 
the trustee and fiduciary of several MEPs has been indicted for 
allegedly using plan funds for personal use and misrepresenting the 
fund investments to clients. Solis v. Hutcheson, 12-cv-236 (D. Idaho). 
The district court has entered a temporary restraining order removing 
defendant Matthew Hutcheson from plan administration and appointing an 
independent fiduciary to take control of plan assets. 

[55] A GAO report found that single employers that sponsored plans may 
not be aware of the fees they were charged and likely paid more than 
they realized. See GAO, 401k Plans: Increased Education Outreach and 
Broader Oversight May Help Reduce Plan Fees, [hyperlink, 
http://www.gao.gov/products/GAO-12-325] (Washington, D.C.: Apr. 24, 
2012). 

[56] 26 U.S.C. § 401(a)(4); 26 C.F.R. §§ 1.401(a)(4)-1, 1.401(a)(4)-4 
and 1.413-2(a)(3)(iv) (2012). 

[57] The firm offering the MEP can voluntarily resolve plan compliance 
problems through the IRS's Employee Plans Compliance Resolution 
System. One MEP representative told us that IRS is helpful in 
correcting any compliance issues or mistakes. 

[58] Title II of ERISA amended the IRC. Although those provisions are, 
therefore, usually thought of and referred to only as part of the IRC, 
they were enacted as part of ERISA. ERISA, §§ 1001-2007, 88 Stat. 898-
994. 

[59] 29 U.S.C. § 1002(3). 

[60] 29 U.S.C. § 1002(1) and (2). Therefore, unless a plan is 
maintained by an employee organization such as a union, it can only be 
maintained under ERISA by an employer. The Title I definition of 
employer is "any person acting directly as an employer, or indirectly 
in the interest of an employer, in relation to an employee benefit 
plan; and includes a group or association of employers acting for an 
employer in such capacity." 29 U.S.C. § 1002(5). Under its advisory 
opinions, Labor has long looked at certain factors, such as pre-
existing relationships among employers, to determine if a group of 
employers constitutes a bona fide association of employers that may, 
therefore, sponsor a single employer plan under Title I of ERISA. 
Pension and Welfare Benefits Admin., U.S. Dept. of Labor, Advisory 
Opinion 83-15A, 1983 ERISA Lexis 43. 

[61] Department of Labor Advisory Op. 2012-04A was issued to an 
operating open MEP. In addition, on May 25, 2012, Labor released 
another relevant opinion. Department of Labor Advisory Op. 2012-03A 
was issued to a firm interested in maintaining a MEP comprised of the 
abandoned plans of multiple employers. 

[62] While we note that Labor and IRS have not coordinated their 
statutory interpretations more broadly, the agencies did directly 
collaborate on the advisory opinions themselves. According to agency 
officials, Labor, IRS, and PBGC extensively discussed Labor's two 
recently issued advisory opinions related to MEPs prior to their 
publication. 

[63] While the opinion clarified that open MEPs are not considered 
single-employee benefit plans under ERISA, the opinion does not 
preclude the possibility of IRS determining that an open MEP qualifies 
for preferential tax treatment under the IRC. Indeed, the advisory 
opinion specifically states that Labor was not expressing any opinion 
on the tax-qualified status of pension plans that cover employees of 
multiple employers. 

[64] EBSA is the entity within Labor that determines what constitutes 
an employee benefit plan under Title I of ERISA. However, PBGC, which 
is also within Labor, defines a MEP differently for purposes of Title 
IV of ERISA, and uses a definition based on whether plan assets are 
available to pay the benefits of all participants and beneficiaries, 
according to PBGC officials. 

[65] As an additional example, the IRC requires pension plans subject 
to ERISA's vesting requirements to report annually (using IRS Form 
8955-SSA) on information such as the names and taxpayer identification 
numbers of plan participants who have separated from the plan and are 
entitled to deferred vested benefits but received none during the 
year. 26 U.S.C. § 6057(a)(1). As part of a qualified MEP it is not 
clear whether participating employers must submit this form to IRS or 
not. 

[66] For example, in 1983, Labor opined that over 100 agencies 
affiliated with a local United Way lacked the relationship necessary 
to sponsor a single employee pension benefit plan under ERISA, even 
though they coordinated services and made a common appeal for 
donations. Pension and Welfare Benefits Admin., U.S. Dept. of Labor, 
Advisory Opinion 83-21A, 1983 ERISA Lexis 38. 

[67] According to Labor officials, a PEO does not represent a bona 
fide association but establishes an employer relationship with the 
employees of its clients through the services it offers them. A bona 
fide association is established in part when participating employers 
control the plan. 

[68] 29 U.S.C. § 1002(5). 

[69] Labor's advisory opinions on MEWAs may have been prompted by 
abuses by their promoters. Labor officials said not long after 
Congress enacted ERISA, Labor began enforcement actions against MEWA 
operators for charging excessive administrative fees and leaving plans 
unable to pay promised benefits, among other abuses. See GAO, Employee 
Benefits: States Need Labor's Help Regulating Multiple Employer 
Welfare Arrangements, [hyperlink, 
http://www.gao.gov/products/GAO/HRD-92-40] (Washington, D.C.: Mar. 10, 
1992). When state insurance regulators found such practices violated 
their insurance laws, MEWAs claimed to be ERISA-covered plans 
preempted from state regulation. According to a Labor official, the 
MEWAs that failed to maintain adequate funds to pay promised benefits 
were often comprised of otherwise unrelated employers. Labor is still 
confronting challenges stemming from participant abuses. On December 
6, 2011, under new authority Labor was granted by the Patient 
Protection and Affordable Care Act (Pub. L. No. 111-148 § 6606, 124 
Stat.119, 781, (codified at 29 U.S.C. § 1021(g) (2010), Labor proposed 
new reporting requirements to better regulate MEWAs. 76. Fed. Reg. 
76,222. (Dec. 6, 2011). 

[70] 29 U.S.C. § 1204. 

[71] 29 U.S.C. §§ 1002(21) and 1104, and 1023(a)(1), respectively. 

[72] Certain transactions between plans and parties-in-interest or 
fiduciaries are statutorily prohibited. Such transactions generally 
include activities that could be characterized as forms of self-
dealing and other conflicts of interest. 29 U.S.C § 1106. 

[73] The cycle for multiple employer plans is "cycle B" and the 
current determination letter submission period opens on February 1, 
2012, and ends on January 31, 2013. 

[74] For example, Labor officials told us they intend to address open 
MEP compliance issues such as prohibited transactions through the 
established processes of EBSA regional offices. 

[75] For example, one California proposal would provide for a 
retirement savings trust administered by the state and generally 
require employers with five or more employees to offer a payroll 
deposit arrangement so employees could contribute part of their pay to 
an account in that retirement savings trust. Calif. SB 1234 (2012). 
Effective June 20, 2012, Massachusetts permits the state treasurer to 
administer a plan for small, nonprofit employers after getting 
"approval" from the IRS and assurances that the plan is consistent 
with ERISA. Mass. Gen. Laws ch. 29, § 64E (2012). We did not assess 
whether such arrangements would operate as private sector or 
governmental plans, any preemption issues, or whether they could be 
structured as bona fide MEPs consistent with Labor's recent advisory 
opinions. State and local government plans are excepted from coverage 
under Title I of ERISA. 

[76] Specifically, one expert suggested a safe harbor design may be an 
ideal model for an open, defined contribution MEP. A safe harbor 
401(k) must provide for mandatory employer contributions that are 
fully vested when made. The safe harbor 401(k) plan is not subject to 
the annual nondiscrimination tests that apply to traditional 401(k) 
plans. 26 C.F.R. § 1.401(k)-3 (2012). 

[77] Relatedly, Labor notes that the data collected for the Form 5500 
is not easily used to determine the number or characteristics of MEPs 
because the research data files and the methodology underlying the 
analysis is designed to support Labor's statistical categorization and 
not designed to separately identify MEPs. 

[78] See GAO, Retirement Income Data: Improvements Could Better 
Support Analysis of Future Retirees' Prospects, [hyperlink, 
http://www.gao.gov/products/GAO-03-337] (Washington, D.C.: Mar. 21, 
2003). 

[79] See U.S. Department of Labor Employee Benefits Security 
Administration, Private Pension Plan Bulletin Historical Tables and 
Graphs, 2009 Data Release Version 1.2 (Washington, D.C.: March 2012) 
and U.S. Department of Labor Employee Benefits Security 
Administration, Private Pension Plan Bulletin: Abstract of 2009 Form 
5500 Annual Reports, Version 1.0 (Washington, D.C.: December 2011). 

[End of section] 

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