01 Aug 401(k) Rule Change Allows for Creation of Multiple-Employer Plans
Yesterday, the Labor Department made public a new final rule that will make it easier for small businesses to offer 401(k) plans to their employees. This rule will go into effect on September 30th, and will allow multiple small businesses to band together to offer an employer-sponsored retirement plan. Here’s what we know about this rule change thus far.
What Is It?
The purpose of this rule change is to make employer-sponsored 401(k) plans more affordable for small businesses. For most small business owners, sponsoring a retirement plan for its employees is not feasible due to a number of limiting factors connected to the company’s smaller size. However, by allowing multiple small businesses to band together to sponsor these retirement plans, the rule change makes it possible for small business owners to offer these benefits to their employees. These types of plans are being referred to as multiple-employer plans.
What Are the Restrictions?
Under the new rule, released by the Labor Department on July 29th, companies that wish to band together for a multiple-employer plan must meet one of two requirements. They must either:
- Be located in the same state or metropolitan area, or
- Work in the same industry.
So, two accounting firms in different states could create a multiple-employer plan together, as could an accounting firm and a construction company located in the same area. However, an accounting firm and a construction company located in different states cannot create a plan together.
Will It Impact You?
Obviously, the answer to this depends on your employer. If you work for a small business that doesn’t currently offer a 401(k) plan, speak to your employer about whether or not they’ll consider providing a multiple-employer plan once the rule goes into effect on September 30th. And, if you need any assistance with your retirement planning or handling the taxes on your new retirement account, be sure to reach out to our Provo accounting firm for professional advice and expert accounting services.