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What Is A Multiple Employer Aggregation Program (MEAP)?

by Kevin Schuler on Sep 15, 2022 11:37:33 AM

Retirement plans can be a key way to attract and retain workers in today’s labor market. Yet, only 26% of small businesses offer a 401k. One of the main reasons is the perception that 401ks are too costly. While there are expenses involved in offering a plan, lower-cost options are available, one of which is a multiple employer aggregation program (MEAP). What is a MEAP 401k? Let’s find out.

In this article, we’ll explain what a multiple employer aggregation program 401k is, how it works, and the pros and cons of this approach to retirement plans. After reading this, you’ll be able to decide if taking advantage of a MEAP 401k is the right choice for your business and your employees.

What is a MEAP?

A MEAP 401k is a group retirement plan that multiple unrelated employers can join through their association with an organization. For example, a Chamber of Commerce may have a plan that it offers to its members. In that case, the Chamber would be the MEAP sponsor responsible for administrative duties and, generally, fiduciary liability.

The idea behind a MEAP is to enable small businesses to take advantage of group participation in order to have a more cost-effective and less burdensome retirement plan offering.

Are a MEP and a MEAP the same?

While a MEP and MEAP are similar, there is a key difference between a multiple employer plan and a multiple employer aggregation program. And that is that MEP members with some commonality join together to form a single plan. With a MEAP, on the other hand, the joining employers maintain their own single plan and are not grouped into one larger plan with other participating employers.

This difference gives members of a MEAP more flexibility to customize their plan based on their unique needs.

How does a MEAP work?

When you join a MEAP, you’ll need to sign an initial agreement. Then, as we just discussed, you’ll have the ability to customize your 401k for your employees. That means you can decide whether to offer a match, the investment options you want, and more.

After you design your plan, you’ll only have a few responsibilities. These include depositing contributions and submitting payroll files for upload in a timely manner, periodically monitoring the program and third parties who are managing administrative and fiduciary tasks to make sure the plan provisions are being administered properly, and completing annual census and ownership verification for testing.

The rest of the administration of your 401k will be handled by your MEAP sponsoring organization. They’ll handle a wide variety of tasks, including:

  • Plan document design
  • Enrollment
  • Form 5500 filing
  • Employee loans and distributions

What are the advantages of a MEAP?

The biggest advantage of a MEAP is that you can more easily and affordability offer a retirement plan to your employees. More specifically, you’ll realize:

  • Potential pricing efficiencies that you may not realize by sponsoring a plan on your own
  • The flexibility to customize your own plan design
  • Third-party management of many of the administrative tasks associated with operating a retirement plan
  • Access to well-priced investments with a large selection of fund families usually only available to larger plans
  • Expert-level fiduciary support that may otherwise be unavailable

What are the downsides of a MEAP?

As you evaluate a MEAP 401k as an option, you’ll also want to consider any potential disadvantages of this type of plan. Some potential drawbacks of this approach include:

  • Loss of control since you’ll need to contact the sponsor for things like recordkeeping reports
  • Challenges if you decide to exit the MEAP
  • Employers still hold the fiduciary role and responsibility for monitoring the MEAP
  • Economies of scale may be less than with an MEP or Pooled Employer Plan (PEP)
  • A fixed fund lineup that all adopting employers share

How to Decide if a MEAP 401k is the Best Plan for Your Business

With a MEAP, you’ll have fewer administrative duties than you would with a single employer plan, less fiduciary responsibilities and liabilities, and possibly lower costs through greater plan asset totals. But those pros don’t make this type of plan right for every business.

If you want to boost your benefit offerings and are looking at ways to make your company more attractive to current and prospective employees with a retirement plan, you may want to consider other options. A 401k provider can help you identify the best fit for your company. Read our next article on choosing a 401k provider to help you choose a partner that can help you with your retirement plan offerings. 

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