Comments to DOL Regarding Prohibited Transactions Involving Pooled Employer Plans.

Wednesday, July 22, 2020 - 11:15am

Office of Regulations and Interpretations,

Employee Benefit Security Administration
Room N -5655
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20201

Re: Prohibited Transactions Involving Pooled Employer Plans Under the SECURE Act and
Other Multiple Employer Plans –RIN: 1210 –ZA28

To Whom It May Concern:

On behalf of the U.S. Chamber of Commerce ( “the Chamber ”), this letter responds to the Department of
Labor’s ( “DOL ”) request for information regarding Prohibited Transactions Involving Pooled Employer
Plans . We appreciate the DOL’s work in this area and the opportunity to comment. Our response is
directly below each request, and our comments respond solely with respect to issues relating to
Association Retirement Plans.

A. Pooled Plan Providers and MEP Sponsors

8. Do employer groups, associations, and PEOs described in the Department’s MEP Final
Rule face similar prohibited transactions to those of pooled plan providers, and do they
have similar need for additional prohibited transaction relief? Are there prohibited
transaction issues unique to empl oyer groups or associations, or PEOs?

On July 31, 2019, the DOL published its final regulations entitled “Definition of ‘‘Employer’’
Under Section 3(5) of ERISA — Association Retirement Plans and Other Multiple -Employer
Plans.” We believe that this is a com prehensive regulation that addresses the unique needs of
Association Retirement Plans (ARP) , and the DOL does not need to issue further guidance
related to ARPs, including any prohibited transaction guidance or exemptions with respect to
employer groups or associations.

B. Plan Investments

2. What role will the entities serving as pooled plan providers or MEP sponsors, or their
affiliates or related entities, serve with respect to the investment options offered in PEPs
and MEPs?

Under the final ARP re gulations, the association of employers is considered to act on behalf of the employers, and, therefore, is the employer for purposes of establishing an employee pension benefit plan. 1 ERISA specifically provides that the association will be the plan spons or of the ARP. 2 As plan sponsor, the association has the duty to determine the named fiduciary, appoint an investment manager as defined under ERISA Section 3(38) 3, if necessary, and delegate any other functions, including investment functions. W ith respe ct to selecting plan investment options, an ARP is no different than a single employer plan in that as the plan sponsor, unless other wise delegated, is responsible for the selection of investment options and monitoring of any delegated duties.

C. Employe rs in the PEP or MEP

2. Will larger employers also seek to join PEPs or MEPs in order to take advantage of
additional economies of scale? Will any additional prohibited transactions exist as a result
of substantial size differences between employers in t he PEP or MEP (e.g., because a large
employer has greater ability to influence decisions of a pooled plan provider or MEP
sponsor as compared to a small employer)?

The Chamber does not believe that any additional prohibited transaction would exist as a r esult
of a substantial size difference between employers in a MEP. The association, as plan sponsor,
and any delegated entities, have the same fiduciary responsibilities to all participating employers
regardless of size.

3. Will the existence of multipl e employers in a PEP or MEP cause greater exposure to
prohibited transactions in connection with investments in employer securities or employer
real property? In what form will PEPs and MEPs hold employer securities or employer
real property?

Generally speaking, from a practical aspect, MEPs will not include employer securities or
real property as an investment option.

As provided in the ARP regulation, a MEP may only be an individual account plan. The vast
majority of individual account plans are participant directed accounts under ERISA Section
404(c). 4 To make the economies of scales work, MEP plans sponsors may decide to offer the
same investment lineups to all participants . From a practical matter, it may be challenging to
allow some participa nts to invest in employer securities or real property but not others. As such,
it is highly unlikely an ARP would offer employer securities or real property as an investment

4. Do respondents anticipate that prohibited transactions will occur i n connection with a
decision to move assets from a PEP or MEP to another plan or IRA, in the case of a
noncompliant employer? Do respondents anticipate that any other prohibited transactions
will occur in connection with the execution of that decision?

I t does not appear that there would be prohibited transaction issues with respect to either the
decision to or the execution of moving assets from a n ARP to another plan or IRA because an
association that sponsors a n ARP would not be a n individual account p lan service provider so
there would not be an issue under ERISA 406(a) or (b). 5
To the extent that there could be an issue under ERISA Sec tion 406(a), the selection of a service provider to take the assets from a n ARP because of an employer's non - compliance should be exempt under ERISA Section 408((b)(2). 6

The DOL may wish to consider a “safe harbor” for plans that must move assets from a MEP to
another plan or IRA similar to the current safe harbor under 29 C.F.R. Section 404a - 2 with
respect to automatic rollovers to individual retirement accounts.


We thank you for your consideration of these comments, and we look forward to working with the DOL
on these issues in the future.


Chantel L. Sheaks
Executive Director, Retirement Policy