Ordering Up Retirement Changes: How Trump’s Proposals Affect Plan Sponsors and Advisors

President Trump’s most recent executive order creates the potential for significant changes in how private sector retirement plans operate.

Here’s a guide to the three main provisions of the order and what they mean for plan sponsors and advisors.

Provision 1: Allowing “Open” Multi-Employer Plans

What’s Happening: The first part of Trump’s order asks the Departments of Labor and the Treasury to incentivize more small businesses to offer retirement plans, possibly by making it easier for them to offer a joint 401(k) plan, also known as a multiple employer plan or MEP. Currently, only businesses that are related in some way—part of the same trade association, for example—can form MEPs. The departments could change the rules to allow businesses with no relationship to one another to offer them. They could also potentially change a rule that disqualifies an entire plan if one member breaks federal rules.

Things for Plan Sponsors to Think About: Lack of money, time and expertise: these are three reasons that small businesses often shy away from offering a defined contribution (DC) retirement plan. Only 53% of people who work at companies with 100 employees or less have access to a workplace retirement plan, compared to 89% of those at companies with 500 employees or more. Theoretically, it would be cheaper and easier for small companies to offer a 401(k) if they could pool their resources and bargaining power to save money on administrative tasks, recordkeeping and investment fees.

Additionally, the sponsor of the MEP, not the employer, would be the fiduciary responsible for plan administration and investments. However, while joining an open MEP might allow companies to lighten their fiduciary responsibilities, it likely would not free them entirely. While an outside firm might take fiduciary responsibility for selecting and monitoring the investments offered under the plan, member firms might still retain a fiduciary role in choosing the MEP provider.