MEP 401(k) for Small Businesses

81% of prospective employees consider retirement programs to be a major factor in their decision-making process.​Transamerica Center for Retirement Studies
A recent National Compensation Survey by the Bureau of Labor Statistics found that only 46% of small businesses with 1-99 employees offer any kind of retirement plan.​U.S. Bureau of Labor Statistics

What Is a MEP?

A Multiple Employer Plan (MEP) is a fully-integrated yet fully customizable, turn-key retirement plan designed to reduce employer and personal fiduciary liability. An ‘open’ MEP is a plan where participating unrelated employers have no commonality except for providing retirement benefits to their employees.

Why Should I Consider a MEP Instead of a Traditional 401(k)?

At the participant level, the plan will feel very much the same as any 401(k) plan available in the marketplace. In fact, employees may not even notice a difference at all!

  • Have access to their plan online.
  • Be able to receive statements electronically.
  • Be provided with education about the plan and its investment options.
  • Have more and cheaper investment choices.
  • Be able to take loans and hardship withdrawals.
  • Be able to save for retirement in an employer-sponsored plan.

The benefits are just as compelling from the perspective of the Adopting Employer:

  • Retain all the flexibility in design that they would have in most other plans.
  • Will no longer be responsible for filing an IRS Form 5500.
  • Will have the opportunity to reduce their costly annual plan audit (required for plans that have over 100 eligible employees).
  • Replaced as the plan administrator and trustee for their retirement plan.
  • And most importantly: employer fiduciary liability is reduced as The MEP transfers personal liability to an independent fiduciary.

Employer Features, Responsibilities, and Liabilities in a Traditional 401(k) vs a MEP

Traditional 401(k) Plan

Employer serves as Plan Sponsor, named fiduciary, & Trustee of Plan. Responsibilities include:

  • Design Plan Document and maintain qualified status; produce and maintains an Investment Policy Statement (IPS); comply with ERISA Section 404(c) provisions; provide prospectus delivery to participants on investment alternatives.
  • Oversee and manage the process, in conjunction with TPA, for annual filing of Form 5500; provide for an annual audit of the plan (if required).
  • Conducts periodic investment committee meetings; review and validate compliance testing; submit Year-End census data to TPA; distribute required annual notices to participants (e.g. Safe Harbor).
  • Coordinate enrollment and employee education meetings; administer Distribution and Rollover requests for terminated employees.


Eliminates the burdens associated with a traditional 401(k) by reducing the above list to four items. The employer only needs to:

  • Serve as Adopting Employer to the Plan.
  • Provide initial Year-to-Date employee census file.
  • Submit timely and accurate payroll data each pay period.
  • Provide requested annual information for year-end testing.

What Do I Need to Know about 401(k) Plan Fees?

Categories of Plan Fees

  • Custodian: Holds your plan’s assets and processes transactions in and out of the plan.
  • Recordkeeper or “Platform”: Documents participants, their assets, investments, and money movements.
  • Third Party Administrator (TPA): Handles many ongoing tasks required to keep your plan running.
  • Bundled: Some plan providers bundle the TPA, custodian, and recordkeeper fees above into one.
  • Advisor: Helps you make good decisions managing your plan, and helps your employees make the most of their savings and investments.
  • Other Third-Party Vendors: Your plan may also utilize the services of other vendors, including auditors, brokers, asset managers, or fund managers

Plan Fees Paid by Employers

  • Employers can choose to pay either administrative or fiduciary and consulting fees, pay both, or have all fees paid by employees who participate in the plan.
  • Only 17.8% of employers fully pay administrative fees. A further 19.5% share these expenses with employees.
  • The rest have set up their plans so that these fees are paid out of the plan’s assets or, in other words, by anyone who participates in the plan.

Plan Fees Paid by Employees

  • Employees participating in a plan can pay any type of fees, but most commonly pay investment and administrative fees.
  • Investment management fees are associated with employees’ investment choices like mutual funds through the funds’ expense ratios.
  • Fiduciary and consulting fees cover fiduciary services and employee education and are usually taken directly from plan assets.

Ready to learn more? Download a copy of our complimentary “Collaborative Retirement Trust” brochure!

Have more questions? Set up a complimentary consultation with us.

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