U.S. DOL Issues Final Rule Allowing Business To Join Together To Provide 401(k) Plans
The U.S. Department of Labor (DOL) last week released the final regulation that will make it easier for U.S. small businesses to collaborate to offer 401(k) retirement plans to their employees.
As The Wall Street Journal explained, the rule enables companies in different industries to create joint retirement plans “as long as they are located in the same state or metropolitan area.” The rule also would allow similar companies located in different regions of the country to join together to provide 401(k) plans.
In its announcement the DOL said, “By expressly permitting these new plan arrangements, the rule enables small businesses to offer benefit packages comparable to those offered by large employers.” The agency also said it expects the rule “to reduce administrative costs through economies of scale and to strengthen small businesses’ hand when negotiating with financial institutions and other service providers.”
As of 2018, 85 percent of businesses with 100 or more employees offered retirement plans for workers, compared to only half of small businesses. The rule goes into effect on September 30, 2019.