Market Overview

Consequences of Unrestricted MEPs

Share:

Marlborough, MA, Aug. 30, 2018 (GLOBE NEWSWIRE) -- FOR IMMEDIATE RELEASE

With the lifting of restrictions on Multiple Employer Plans "MEP" two major shifts are likely to occur in the retirement plan market. First is that all small plans will gravitate to local MEPs that do not include their direct competitors. The second is a massive increase in demand for local MEPs.

The MEP requirement that participating employers must be in the same industry has stunted any chance of growth. Small businesses for whom MEPs would offer great benefits would have to join forces with the very companies they face every day on the competitive battlefield. This problem is even more acute by the fact that most small businesses serve a local area so the baker would have to join forces with the baker in the same town. To provide the economies of scale, the small businesses must be geographically close together.

The unrestricted MEP would permit multiple MEPs in one locality, each serving a diverse set of non-competing businesses. With the removal of the competitive distaste, it is reasonable to assume that small businesses would find the better, cheaper and less risky plan to be irresistible.

The second shift is anticipated to be for new MEPs. This market would be unattractive for large service providers with centralized operations. Locally situated advisors could fill the need but often lack the technical expertise to administer an MEP. The most likely sector are third party administrators (TPAs) who possess the knowledge and skill and already serve these local customers.

The TPA need only become familiar with how to mitigate the fiduciary risk and could almost immediately establish an MEP.

The MEP also opens a new market that consists of small businesses that do not currently offer plans to employees. There is the potential to double the size of the small plan market within two years.

DALBAR, Inc. is the financial community's leading independent expert for evaluating, auditing and rating business practices, customer performance, product quality and service. Launched in 1976, DALBAR has earned the recognition for consistent and unbiased evaluations of investment companies, registered investment advisers, insurance companies, broker/dealers, retirement plan providers and financial professionals. DALBAR awards are recognized as marks of a superior standard of care in the financial community.


Contact: Cory Clark

617.723.6400

CClark@DALBAR.com

DALBAR, Inc. Logo

View Comments and Join the Discussion!