DOL Issues Proposed Regulations Establishing Registration Requirement for Pooled Plan Providers

By Barry Salkin and Susan Rees

One objective of the Setting Every Community Up for Retirement Enhancement (“SECURE”) Act, which was enacted on December 20, 2019, was to expand retirement savings. One of the ways in which that statutory purpose was achieved was through conditionally permitting multiple employer plans (MEPs) of unrelated employers, “open MEPs,” effective in 2021. Section 101 of the SECURE Act amended Section 3(2) of ERISA to eliminate the commonality of interest requirement for establishing certain individual account plans, referred to in the SECURE Act as “pooled employer plans” that satisfied certain specific statutory requirements. Among other requirements, pooled employer plans must designate a pooled plan provider to serve as a named fiduciary and plan administrator. Further, Section 101 of the SECURE Act added Section 3(44) of ERISA to require pooled plan providers to register with the Department of Labor (“DOL”) and the Treasury Department before beginning operations, and authorized the DOL to require additional information. On August 20, the DOL released a draft proposed regulation to implement the statutory requirement, and indicated that registration with the DOL would also satisfy the statutory obligation to register with the Treasury Department. The guidance only applies to pooled employer plans as defined in new ERISA Section 3(43), established after the date the SECURE Act was enacted, or plans that come into compliance with the SECURE Act’s provisions as of that date. The guidance does not apply to Association MEPS under DOL advisory opinions or Association and PEO retirement MEPs under DOL regulations. According to the DOL, the proposed regulation will be published in the Federal Register in a matter of days.

In the preamble to the proposed regulation, the DOL indicated that the information it was requiring of pooled plan providers in advance of beginning operations was necessary for the DOL to monitor their actions. While the Form 5500, which the pooled plan provider will also be required to file, will contain this information; such Form 5500 reporting is generally unavailable for more than 18 months. The SECURE Act’s registration requirements provide the DOL with more immediate access to pooled provider information. The proposed instructions to the Form, however, caution the filer to use all the same EIN and other information for a pooled employer plan as used on the Form 5500.

The proposal includes a new Form PR (Pooled Plan Provider Registration) which must be filed electronically with the DOL no earlier than 90 days and no later than 30 days before beginning operations as a pooled plan provider, which the proposed regulation defines as publicly marketing services as a pooled plan provider or publicly offering a pooled employer plan. Therefore, activities such as filing for a tax identification number or adopting a business plan are not taken into account. The information required to be provided on Form PR include:

1. the legal business name and trade name of the organization;
2. the entity’s business mailing address and phone number;
3. the employer identification number (EIN);
4. the entity’s website address or addresses;
5. the name, address, phone number, and email address for primary compliance officer;
6. the agent for service of legal process, the address at which process may be served, and a statement that service of legal process may be made upon the pooled plan provider;
7. the approximate date when pooled plan operations are expected to commence;
8. a description of the administrative, investment, and fiduciary services that will be provided in connection with the pooled employer plan, including a description of the role of any affiliate in performing such services. Affiliates include all parties who are treated as a single employer with the party intending to be a pooled plan provider including, among other parties, all members of the pooled plan provider’s controlled group under the Internal Revenue Code;
9. a statement of any federal or state convictions regarding the performance of services for employee benefit plans against the pooled plan provider, or its officers, directors, or employees, if the conviction, or related imprisonment, is within 10 years of the date of registration; and
10. a statement disclosing any ongoing criminal, civil, or administrative proceedings related to the provision of services to employee benefit plans against the pooled plan provider, or its officers, directors, or employees by the federal or state government or other regulatory authority.

The proposal also requires a new Form PR filing if the pooled plan provider becomes aware of any incorrect statement on this initial filing. A pooled plan provider is required to file only one Form PR, regardless of the number of pooled employer plans that it operates, but will have to file a supplemental Form PR for each new pooled employer plan before it begins operations, if not listed on the provider’s initial registration filing.

The proposed regulation requires a second filing, no later than the initiation of operations of the plan as a pooled employer plan. At that time, the pooled plan provider must file with the DOL a supplemental report using the Form PR containing the name and EIN for the pooled employer plan, and the name and EIN for the trustee of the plan. A pooled employer plan is treated as beginning operations when it is considered to be covered by Title I of ERISA within the meaning of Section 4 of ERISA.

In addition, within 30 days of the following reportable events, the pooled plan provider must file a supplemental report on Form PR:

1. any change in the information provided in either the initial registration or the initial supplemental report;
2. any significant change in the corporate business structure of the pooled plan provider such as a merger, or a bankruptcy;
3. receipt of written notice of:

1. 1. any administrative or enforcement action related to services, operations, and or investments of any pooled employer plan, or other employee benefit plan, against the pooled plan provider, or its officers, directors, or employees in any court or administrative tribunal by the federal government, the state government, or other regulator;
   2. a finding of fraud or dishonesty by a federal or state court or federal or state governmental agency relating to services, operations, and or investments of any pooled employer plan, or other employee benefit plan, against the pooled plan provider, or its officers, directors, or employees; and
   3. the filing of federal or state criminal charges relating to services, operations, and or investments of any pooled employer plan, or other employee benefit plan, against the pooled plan provider, or its officers, directors, or employees.

Finally, if a pooled plan provider is terminated and ceased operating all pooled employer plans, the pooled plan provider must file a final supplemental Form PR. This final filing is triggered by the adoption of a resolution terminating the last pooled employer plan, distribution of all assets under that plan, and the filing of a final Form 5500 for that plan.

Takeaway

We applaud the DOL (and the agreement from the Treasury Department) for proposing this registration guidance ahead of the date that pooled employer plans may be established. However, substantive guidance is needed on how pooled employer plans and pooled plan providers are to operate. On that, the DOL tells us:

. . .Although the Department does not have specific details as to how pooled employer plans authorized under the SECURE Act will be structured and operated, the Department has assumed that they may be similar to other currently operating multiple employer plans. Additionally there may be challenges associated with these new types of plans that the Department, the Treasury Department, or IRS as the federal agencies charged with oversight of private-sector pension plans, may need to address.

The DOL, although candid about the lack of guidance provided, does not explain how pooled employer plans can be structured like existing multiple employer plans, since the DOL preamble also states that the SECURE Act’s “bad apple” relief is only available to multiple employer plans that comply with the SECURE Act, and thus the major operational confusion for existing multiple employer plans remains to be resolved.

The Preamble asks for comment on additional types of information to require on the Form PR. For instance, the DOL asks if it would be useful to employers for the pooled plan provider to report investigations by and/or informal settlements of fiduciary matters with the DOL and PBGC. These suggestions or other comments on the proposed regulation are due on or before 30 days after its publication date in the Federal Register.

Please contact us should you have any questions about the proposed pooled plan provider registration requirements.