June 11, 2012

Multiple Employer Plans Know Where Responsibility Lies

The DOL has recently issued an Opinion Letter (DOL Advisory Opinion 2012-04A - Multiple Employer Plans) clarifying the status of an open multiple employer plan.  In these types of arrangements, each employer is sponsoring, according to the Opinion Letter, its own ERISA plan; and, each employer is responsible for its own ERISA compliance, including reporting and disclosure requirements.  It is important to remember that if the plan covers more than 100 participants, the Form 5500 must be accompanied by an independent accountant’s audit.  While this Opinion Letter specifically addresses a multiple employer plan providing retirement benefits, its message equally applies to a multiple employer welfare arrangement. 

In order for ERISA to apply at the plan level, there are two requirements that must be satisfied; they are:

  1. A commonality of interest requirement in which the entity maintaining the plan and its participating employers must be tied by a common economic or representational interest beyond simply the provision of benefits.  This is a facts-and-circumstances test; some of the factors considered in determining the commonality of interest test are:
  • How employer members are solicited?
  • Who is entitled to participate?  Who actually participates?
  • How is the group of employers formed?
  • What is the group’s purpose?
  • What is the relationship of the participating members beyond plan sponsorship?
  1. A control test requirement to determine whether employer members have the right to control and direct the activities of the plan. 

The commonality of interest and control test applies both to multiple employer retirement plans, as well as to multiple employer welfare arrangements. In both instances, only if the commonality of interest and control are present will ERISA apply at the plan level.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.


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