Millions of workers employed by small businesses could soon have greater access to company retirement plans.
On Monday, the U.S. Department of Labor established a rule that makes it easier for small businesses to band together and offer joint 401(k) retirement plans to their employees through Association Retirement Plans, or ARPs. The final rule will go into effect Sept. 30.
Under the new rule, ARPs can be offered by associations of employers in a city, county, state, multi-state metropolitan area or in a nationwide industry, according to theLabor Department. The plans could also be sponsored through a Professional Employer Organization (PEO), a human-resource company that small businesses can use to outsource employment responsibilities.
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The move is designed to enable small businesses to offer plans comparable to those provided by larger employers. It’s also expected to reduce administrative costs and strengthen small businesses’ negotiations when dealing with service providers, according to the Labor Department.
“Many small businesses would like to offer retirement benefits for their employees, but are discouraged by the cost and complexity of running their own plans,” Acting Secretary of Labor Patrick Pizzella, said in a statement. “Association Retirement Plans offer valuable retirement security to small businesses’ employees through their retirement years.”
Previously, multiple-employer plans were limited to employers with an affiliation or connection, such as a common owner or members of an industry trade group, according to the Labor Department. About 38 million private-sector employees in the U.S. currently don’t have access to a retirement savings plan through their employers..
In August 2018, President Donald Trump issued an executive order that called for the labor secretary to clarify and expand the circumstances under which U.S. employers could sponsor or adopt a workplace retirement option for their employees.
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