PRIVATE SECTOR 

PENSIONS

Federal Agencies 

Should Collect Data 

and Coordinate 

Oversight of Multiple 

Employer Plans

Report to the Chairman, Committee on 

Health, Education, Labor, and 

Pensions, U.S. Senate

September 2012

GAO-12-665

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-665, a report to the 

Chairman, Committee on Health, Education, 

Labor and Pensions, U.S. Senate 

September 2012 

PRIVATE SECTOR PENSIONS 

Federal Agencies Should Collect Data and 

Coordinate Oversight of Multiple Employer Plans

Why GAO Did This Study

GAO has reported that millions of U.S. 

workers lack access to employersponsored pension plans and that 

some small businesses, which offered 

plans at lower rates than large 

businesses, may be deterred by the 

cost of plan administration. MEPs, a 

type of pension plan maintained by 

more than one employer, have been 

supported as an option that could 

expand coverage by lowering 

administrative costs. For this report, 

GAO examined (1) the characteristics 

of private-sector MEPs, (2) the 

advantages and disadvantages of 

MEPs and how their perceived 

advantages are used to market them, 

and (3) how IRS and Labor regulate 

MEPs.

GAO interviewed MEP sponsors, 

pension experts, officials at the 

Department of Labor (Labor), the 

Internal Revenue Service (IRS), and 

the Pension Benefit Guaranty 

Corporation (PBGC), and analyzed the 

primary source of pension data 

reported to the government—the Form 

5500. 

What GAO Recommends

GAO recommends that Labor lead an 

effort to collect data on the employers 

that participate in MEPs. GAO also 

recommends that Labor and IRS

formalize their coordination with regard 

to statutory interpretation efforts with 

respect to MEPs. Furthermore, Labor 

and IRS should jointly develop 

guidance on the establishment and 

operation of MEPs. Agencies generally 

agreed with GAO’s recommendations.

What GAO Found

Little is known about the characteristics of private sector multiple employer plans 

(MEP), especially information regarding the employers that participate in them. 

Although no participating employer information is currently collected in the Form 

5500, the primary source for pension information reported to the government, 

some plan-level information on MEPs is available. GAO’s analysis of 2009 planlevel data shows that the bulk of MEP participants and assets resided in the 

largest 25 private-sector MEPs. Three major sponsor types emerged among the 

top 25 plans: large corporations, associations, and professional employer 

organizations (PEO), which are firms that provide payroll and other human

resources services to clients. These sponsor types differ in various ways, but 

notably, associations and PEO sponsors GAO interviewed tended to have a 

large number of employers participating in their plans. Little is also known about 

a fourth category of sponsor type called “open” MEPs, a type of MEP in which 

employers in the plan share no common relationship or affiliation with the other 

employers in the plan. This sponsor type appears to have come about in 

response to 2002 IRS guidance that allowed certain PEOs to avoid tax 

disqualification of their pension plans if they were converted to MEPs. Soon after 

this guidance was issued, practitioners began offering open MEPs. 

MEPs are marketed as providing several advantages for employers over singleemployer plans, but GAO found that these advantages may not always be unique 

to MEPs. MEPs are marketed as providing reduced fiduciary liability, 

administrative responsibility, and cost. However, other types of single-employer 

plans may also offer reduced fiduciary responsibility and third-party 

administrators can reduce administrative responsibilities. Overall, among MEP 

representatives and pension experts, there was no consensus on whether or not 

open MEPs or PEO-sponsored MEPs could substantially expand pension 

coverage. Given that employers do not directly oversee the plan, there was also 

some concern from Labor officials regarding the risk of MEP abuses, such as 

charging excess fees or mishandling the plan’s assets. Additionally, because all 

of the participating employers are responsible for maintaining the MEP, if one 

employer becomes noncompliant with the tax requirements the plans of all the 

employers in the MEP may lose their tax-qualified status.

Labor regulates MEPs for participant protections under the Employee Retirement 

Income Security Act of 1974 (ERISA), while the IRS regulates them for

preferential tax treatment under the Internal Revenue Code (IRC). However, 

ERISA places requirements on plans that are not required under the IRC, and 

Labor and IRS do not coordinate to reduce the impacts of defining a MEP 

differently. For example, although Labor recently opined that open MEPs are a 

collection of single plans, each separately sponsored by participating employers 

for their employees, open MEPs still qualify for preferential tax treatment under 

the IRC. Pension experts told GAO that such differing treatment can create 

compliance challenges. For example, an open MEP may be able to file a single 

annual report for the IRS but may also have to file annual reports for each of its 

component plans for Labor. Pension experts agreed that compliance guidance 

View GAO from either agency would be helpful. -12-665. For more information, 

contact Charles Jeszeck at (202) 512-7215 or 

jeszeckc@gao.gov. 
Page i GAO-12-665 Multiple Employer Plans 

Letter 1 

Background 3

MEP Advantages Marketed to Employers May Not Be Unique 19

IRS and Labor Treat MEPs Differently, Reflecting a Lack of 

Coordination 24

Conclusions 29

Recommendations for Executive Action 30

Agency Comments and Our Evaluation 31

Appendix I GAO Analysis of Multiple Employer Plan Data 34

Appendix II Comments from the Department of Labor 44

Appendix III Comments from the Department of the Treasury 46

Appendix IV Comments from the Pension Benefit Guaranty Corporation 48

Appendix V GAO Contact and Staff Acknowledgments 49

Tables

Table 1: Percentage of Defined Benefit MEPs, by Reported Funding 

Method, 2009 39

Table 2: Total Plan Assets of MEPs, by Plan Type and Plan Year 39

Table 3: Percentage of All Assets Represented by MEPs, by Plan 

Type and Plan Year 39

Table 4: MEP Participating Employer Estimates, Mean, Median and 

Maximum Employers, 2001 40

Table 5: Maximum Number of Participants and Percentage of 

Participants in MEPs by Sponsor Industry and by Plan 

Type, 2009 41

Table 6:Maximum Number of MEPs and Percentage of MEPs by 

Sponsor Industry and by Plan Type, 2009 42

Contents
Page ii GAO-12-665 Multiple Employer Plans 

Table 7: Percentage of Benefit Types Represented within Each 

Defined Benefit Plan Type, 2009 42

Table 8: Percentage of Pension Feature Types Represented within 

Each Defined Contribution Plan Type, 2009 42

Table 9: Percentage of Defined Contribution Plans by Single, 

Multiple, and Multiemployer Plan Status by Range of Plan 

Participants, 2009 43

Table 10: Percentage of Defined Benefit Plans by Single, Multiple 

and Multiemployer Plan Status by Range of Plan 

Participants, 2009 43

Figures

Figure 1: Number of Defined Benefit and Defined Contribution 

MEPs with Percent Change between Periods, 2001 and 

2009 11

Figure 2: Number of Defined Benefit and Defined Contribution 

MEP Participants with Change between Periods, 2001 and 

2009 13

Figure 3: Top 25 Plan Sponsors of Defined Benefit MEPs, as 

Measured by Total Plan Participants, 2009 37

Figure 4: Top 25 Plan Sponsors of Defined Contribution MEPs, as 

Measured by Total Plan Participants, 2009 38

Figure 5: Percentage of MEPs by Range of Participating Employers 

in the Plan, 2001 Estimate 41
Page iii GAO-12-665 Multiple Employer Plans 

Abbreviations

EBSA Employee Benefits Security Administration

EFAST ERISA Filing Acceptance System

ERISA The Employee Retirement and Income Security Act of 1974

IRC Internal Revenue Code

IRS Internal Revenue Service

Labor Department of Labor

MEP Multiple Employer Plan

MEWA Multiple Employer Welfare Arrangement

NAPEO The National Association of Professional Employer

 Organizations

PBGC Pension Benefit Guaranty Corporation

PEO Professional Employer Organization

Treasury Department of the Treasury

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-12-665 Multiple Employer Plans 

United States Government Accountability Office 

Washington, DC 20548

September 13, 2012

The Honorable Tom Harkin

Chairman

Committee on Health, Education, Labor and Pensions

United States Senate

Dear Chairman Harkin:

Millions of American workers lack access to employer-sponsored pension 

plans. Those who work for small employers are typically less likely to 

have a pension than workers in larger firms. GAO recently reported that 

small employers face several challenges to establishing and maintaining 

pension plans.1

Multiple employer plans (MEP),

In particular, small employers may be reluctant to 

sponsor a plan because the employer is overwhelmed by the number of 

plan options, administrative requirements, and fiduciary responsibilities. 

Consequently, some have argued that pension arrangements that pool 

costs and administrative responsibilities could lead to increased 

coverage.

2

 

1 GAO, Private Pensions: Better Agency Coordination Could Help Small Employers 

Address Challenges to Plan Sponsorship, 

a type of pension plan covering 

employees of more than one employer, have been suggested as a viable 

way to increase coverage by pooling costs. A range of legislative 

proposals, going at least as far back as the 1970s, have been put forth to 

encourage pooled pension arrangements for employers, but were never 

enacted. Further, an emerging trend in private sector MEP sponsorship 

seems to suggest a renewed interest in private sector MEPs; however, 

little is known about private sector MEPs and the importance or 

effectiveness of these plans for small employers. Additionally, little is 

known about the challenges, if any, that MEPs may present to the 

agencies charged with oversight of pension plans: the Department of 

Labor (Labor), the Department of the Treasury’s (Treasury) Internal 

Revenue Service (IRS), and the Pension Benefit Guaranty Corporation 

GAO-12-326 (Washington, D.C.: Mar. 5, 2012).

2 Although the term MEP can be used to refer to employee welfare benefit plans as well 

as employee pension benefit plans, in this report, we use that term to refer only to 

employee pension benefit plans or arrangements that purport to be employee pension 

benefit plans.

 
 

Page 2 GAO-12-665 Multiple Employer Plans 

(PBGC). This report provides an overview of the characteristics and 

utilization of these plans. To this end we will answer the following 

questions:

(1) What are the characteristics of private sector MEPs?

(2) What are the advantages and disadvantages of MEPs and how are 

the perceived advantages being used to market MEPs as a pension 

design option?

(3) How do IRS and Labor regulate MEPs?

To address our objectives, we assessed and analyzed 2009 Form 5500 

data,3 the primary source of information for both the federal government 

and the private sector on employee benefit plans. We also analyzed 2001 

Form 5500 data to assess trends over time, as well as information on 

participating employers that existed at that time. We interviewed at least 

three plan-sponsor representatives from each of the four private sector 

MEP sponsor types we identified via research and interviews. The major 

sponsor types include: certain large corporations, associations, 

professional employer organizations (PEO), and unaffiliated or “open” 

MEPs.4 We identified three sponsor types from a list of MEPs drawn from 

Form 5500 data and we selected interviewees from among the largest 

sponsors of each type.5

 

3 The Employee Retirement Income Security Act of 1974 (ERISA) establishes 

requirements for employee benefit plans Pub. L. No. 93-406, 88 Stat. 829 (codified as 

amended at 26 U.S.C §§ 219, 401-404, 405-408, 910-915, 1379, 4971, 4973-4975, 6057-

6059, 6103, 6104, 6688, 6690, 6692 and 7802; 29 U.S.C. §§ 1001-1461; and 42 U.S.C. § 

1131). Labor, IRS and PBGC jointly developed the Form 5500 so employee benefit plans 

could utilize it to satisfy annual reporting requirements under ERISA and the Internal 

Revenue Code (IRC). The Form 5500 is part of ERISA’s overall reporting and disclosure 

framework, helping to assure that employee benefit plans are operated and managed in 

accordance with certain prescribed standards and that participants and beneficiaries, as 

well as regulators, are provided or have access to sufficient information to protect the 

rights and benefits of plan participants and beneficiaries.

We identified open MEPs as an emerging 

sponsor type, though sponsors of these plans were often new and not 

4 A PEO, very generally, is a firm that provides a means for outsourcing of various human 

resource management and administration tasks for client employers. 

5 Where possible, we selected and interviewed sponsors that offered both defined benefit 

and defined contribution MEPs. However, some of the sponsor types offered only defined 

contribution MEPs. 
 

Page 3 GAO-12-665 Multiple Employer Plans 

necessarily identified by Form 5500 filings. We selected these open MEP 

sponsors through Internet searches and interviewed them as well. We 

also conducted a literature review, and interviewed agency officials, 

including officials at Labor, IRS, and PBGC, as well as pension 

professionals and experts. Our selection of pension experts included 

actuarial experts representing their professional association, as well as 

various other pension experts, particularly those with administrative and 

legal expertise.6 We reviewed relevant federal laws and regulations, as 

well as agency guidance—most notably in the form of advisory opinions 

issued by Labor. Following the issuance of recent advisory opinions, we 

sought reactions from the MEP sponsors and pension experts. We 

conducted our work from March 2011 to September 2012 in accordance 

with generally accepted government auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe the information and data 

obtained, and the analysis conducted, provide a reasonable basis for our 

findings and conclusions based on our audit objectives.

Under Title I of the Employee Retirement Income Security Act of 1974 

(ERISA),7 employers are permitted to sponsor two broad categories of 

pension plans. They are (1) defined benefit plans—in which employers 

generally maintain a fund to provide a fixed level of monthly retirement 

income based on a formula specified in the plan8

—or (2) defined 

contribution plans—in which retirement income is based on employer and 

employee contributions and the performance of investments in individual 

employee accounts.9

 

6 These experts included a representative of a pension consumer rights organization; a 

representative of a nonprofit, nonpartisan, retirement research organization; 

representatives of a private law firm specializing in employee benefits; representatives of 

a membership organization dedicated to retirement plan professionals; and the author of a 

book and journal article on multiple employer benefit arrangements.

A MEP may be a defined benefit plan or a defined 

contribution plan.

7 Pub. L. No. 93-406, 88 Stat. 829. 

8 These formulas may take into account factors such as salary, years of service, and age 

at retirement, regardless of the investment portfolio’s performance.

9 29 U.S.C. § 1002(34) and (35).

Background
 

Page 4 GAO-12-665 Multiple Employer Plans 

There are three types of pension plans that share some features with 

MEPs but are not the focus of this report: (1) A single-employer plan is 

established and maintained by only one employer and for that employer’s 

employees.10 (2) A multiemployer plan is another form of multiple 

employer arrangement where a plan is established and maintained 

pursuant to the terms of a collective bargaining agreement between at 

least one employee organization and more than one employer.11

Specifically, management and labor representatives must jointly govern 

these plans, in which participants can negotiate the plan benefits through 

a union.12 (3) A master or prototype plan is based on a largely uniform 

plan document sponsored by an organization for adoption by employers 

who are either its customers or members.13 An employer who adopts a 

master or prototype plan completes an adoption agreement to elect 

certain options specified in detail in a separate plan document, but 

generally the provider or sponsor centrally administers the plan and, in 

the case of a master plan, pools the assets of the adopting employers into 

a central investment trust.14

 

10 29 U.S.C. § 1002(41) and (42).

Banks, trade or professional organizations, 

insurance companies, and mutual funds are generally allowed by the IRS 

to provide master or prototype plans.

11 29 U.S.C. § 1002(37).

12 We have recently initiated work on multiemployer plans. The work is expected to 

examine efforts to improve multiemployer funded status and policy options that could 

facilitate such an aim.

13 The main parties in the master and prototype plan system are mass submitters, 

sponsors, and adopting employers, and each one is involved at a different “level” in the 

process with respect to the IRS. Mass submitters, or U.S. businesses that submit opinion 

letter applications on behalf of at least 30 unaffiliated sponsors, usually have reduced 

procedural requirements and get expedited treatment from the IRS because of the high 

volume of sponsors they represent and the number of identical or near-identical plans they 

submit to the IRS. This makes it easier and more efficient for IRS to review the large 

number of identical plans. The IRS issues opinion letters (on the acceptability of the form 

of the plan) to mass submitters and/or sponsors of master and prototype plans that have 

been submitted to the IRS for approval. 26 C.F.R. § 601.201(q) (2012). The master and 

prototype sponsor, or a U.S. business that has at least 30 employer-clients each of which 

is reasonably expected to timely adopt the sponsor’s basic lead plan document, then 

makes its plan(s) available for employers to adopt.

14 A prototype plan differs from a master plan in that it does not centralize, or pool, 

investment accounts like a master plan. A separate trust or custodial account is 

established for each employer in the case of a prototype plan.
 

Page 5 GAO-12-665 Multiple Employer Plans 

In addition to employee pension benefit plans, ERISA covers employee 

welfare benefit plans for health care and other employee benefits as well. 

MEPs as pension plans have an analogous welfare arrangement called 

multiple employer welfare arrangements (MEWA). These are also 

maintained by multiple employers, and depending on the facts and 

circumstances, are single employer or multiple employer plans subject to 

requirements under ERISA. 

Labor, IRS, and PBGC share federal responsibility for regulating pension 

plans under ERISA. Labor enforces rules concerning how pension plans 

should operate in the best interest of participants and beneficiaries. 

Accordingly, Labor has the statutory authority to bring legal action against 

all fiduciaries under ERISA. Within Labor, the Employee Benefits Security 

Administration (EBSA) is charged with interpreting and enforcing laws 

designed to assure the security of the pension, health, and other 

employment-based benefits of American workers and their families. 

EBSA issues advisory opinions in which it facilitates compliance with 

ERISA through interpretative guidance.15

IRS, on the other hand, is charged with determining whether a plan 

qualifies for preferential tax treatment in accordance with the Internal 

Revenue Code (IRC). Qualified pension plans receive favorable tax 

treatment, with deferral of taxes on contributions and investment earnings 

until benefits are received in retirement, and to be qualified a plan must, 

among other things, be maintained for the exclusive benefit of the plan 

sponsor’s employees or their beneficiaries.

A plan sponsor may request a 

determination from EBSA that its arrangement constitutes an employee 

benefit plan under ERISA. Through its advisory opinions, EBSA provides 

the position of the department as to the application of one or more 

sections of ERISA. An advisory opinion, which is limited to the facts in the 

opinion, can be relied upon, as a legal matter, only by the parties in the 

opinion. However, these opinions serve as guidance to others on what 

arrangements are considered employee benefit plans under ERISA.

16

 

15 ERISA Procedure 76-1 for ERISA Advisory Opinions, 

http://www.dol.gov/ebsa/regs/aos/ao_requests.html.

Plans may apply to the IRS 

seeking an advance determination as to their qualified status. A favorable 

determination letter provides the plan sponsor with IRS’s opinion that the 

16 26 U.S.C. §§ 401(a) and 501(a). 
 

Page 6 GAO-12-665 Multiple Employer Plans 

terms of the plan as presented to the IRS, conform to the requirements of 

the IRC.

Lastly, PBGC acts as an insurer of private-sector defined benefit pension 

plans by guaranteeing participant benefits up to certain statutory limits 

and, in the case of covered single-employer plans, protecting participants 

when the plan terminates with insufficient assets to pay all benefits, such 

as the bankruptcy of plan sponsors with underfunded plans.

Little is known about the characteristics of private sector MEPs, 

particularly information about the employers that participate in them. No 

information with respect to participating employers in MEPs is currently 

collected in the Form 5500, which is the primary source of pension plan 

information for government oversight activities. However, basic plan and 

sponsor-level information on MEPs is available in the Form 5500 data, 

and we were able to analyze this data. The data show that MEPs are a 

small portion of the overall pension universe and that the bulk of plan 

assets and participants reside among the largest 25 defined contribution 

and defined benefit MEPs. Lastly, we identified a new sponsor type of 

MEP: the “open” MEP. Unlike the other sponsors we identified, the 

employers that participate in open MEPs share no common relationship 

or affiliation with the other employers in the plan.

As described previously, a MEP is a type of pension plan maintained by 

more than one employer.17 Typically, employers participating in a MEP 

have a common interest in some business or association, but do not 

share common ownership control.18 When employers decide to 

participate in a MEP, they legally adopt the plan as their own, as do other 

participating employers. A participating employer may sign an agreement 

that serves to identify the plan terms that will apply to its employees.19

 

17 The IRC sets out specific requirements applicable to MEPs, imposing, for example, 

participation, exclusive benefit and vesting requirements. 26 U.S.C. § 413(c).

18 In this report we refer to the employers that participate in a MEP as participating 

employers.

19 This is sometimes referred to as a joinder agreement. It may also outline the delegation 

of authority necessary under the plan to permit a given MEP to operate.

Little Is Known About Key 

MEP Characteristics

MEPs Are Characterized 

by the Employers 

Participating in Them
 

Page 7 GAO-12-665 Multiple Employer Plans 

Oversight agencies and plan administrators treat individual employers 

within the MEP as maintaining separate, single-employer plans for some 

purposes. For example, the IRS tests individual employers in a MEP 

separately against certain requirements designed to promote equity and 

inclusiveness of contributions and benefits across employees.20

For other purposes, notably certain reporting and auditing requirements, 

oversight agencies treat the MEP as one plan.

Additionally, a MEP may allow each participating employer to specify 

employer and employee contributions and allow participating employers 

to maintain unique plan benefit formulas.

21 Specifically, a MEP 

under ERISA must only file a single Form 5500. In addition, a defined 

benefit MEP pays a single-employer insurance premium to PBGC for the 

plan as a whole.

Currently, the federal government collects little MEP-specific information. 

Most notably, the Form 5500 is the primary source of pension plan 

information for government oversight activities. The Form 5500 used to 

include an IRS schedule that required information on, among other things, 

the number of additional (or participating) employers in a MEP. However, 

it no longer collects this information; consequently, the agencies have no 

 

20 26 U.S.C. §§ 410(b) and 416. These requirements are often referred to as 

nondiscrimination rules and “top heavy” rules. Nondiscrimination testing is done to assure 

that benefits are provided to a cross-section of employees consistent with requirements 

intended to keep plans from disproportionately benefiting highly compensated employees 

and company owners or executives. 

21 Generally, ERISA requires pension plans with 100 or more participants to have an audit 

as part of their obligation to file an annual return/report, known as the Form 5500. 29 

U.S.C. §§ 1023(9)(3)(A) and 1024(a)(2)(A). When an audit is required, the plan 

administrator must select an independent qualified public accountant. A plan audit is one 

way to help protect the assets and financial integrity of the pension plan and ensure that 

the necessary funds will be available to pay promised retirement benefits. An audit helps 

the sponsor carry out legal responsibilities to file a complete and accurate annual 

return/report for the plan each year. In addition, the audit serves as financial disclosure to 

the participants and beneficiaries.

Key Data That 

Characterize MEPs Are 

Not Collected
 

Page 8 GAO-12-665 Multiple Employer Plans 

current data with respect to participating employers in a MEP.22

While the federal government no longer collects participating employer 

data, both IRS and Labor agreed that such information could be helpful to 

their oversight efforts. For example, Labor officials said that basic 

information about a MEP’s participating employers, such as the number 

of employers or a list of names could be useful oversight information.

Participating employer information for a MEP is important because each 

employer may be unique in relation to the plan overall, with regard to 

discretionary plan options or its portion of the overall participants in the 

MEP. 

23

 

22 Prior to 2005, certain plan sponsors used a Schedule T attachment to the Form 5500 to 

satisfy certain tax qualification requirements applied at the employer level. The Schedule 

T included fields for individual employer information along with data to use for 

nondiscrimination testing of employers participating in a MEP. However, as a result of a 

series of events related to electronic collection of data, Labor, IRS, and PBGC no longer 

collect this data. IRS officials pointed out that statute limits the collection of information 

electronically by the IRS. 26 U.S.C. § 6011(e)(1). In 1999 Labor took over responsibility 

for collection of the Form 5500 and, along with IRS and PBGC, implemented a new 

computerized system known as the ERISA Filing Acceptance System (EFAST) to improve 

the processing of forms. Because there was no electronic filing requirement when EFAST 

was implemented, forms were mainly submitted in paper format. Around the late-to-mid 

2000s, Labor led an effort to collect Form 5500 information in direct, electronic form, an 

initiative known as EFAST2. In anticipation of the changes in EFAST2, the IRS requested 

the removal of the Schedule T. The all-electronic system of EFAST2 was instituted as of 

January 2010. Labor and IRS officials said that, because the now-defunct Schedule T was 

not required annually and included calculations that were not necessarily timely, the 

information on participating employers was not particularly direct or timely.

Pension experts we talked with said that MEPs with especially large 

numbers of participating employers may be more challenging to 

administer. For example, as a MEP adds participating employers, the 

likelihood increases that one or more employers may fail 

nondiscrimination testing. This could ultimately jeopardize an entire 

MEP’s preferential tax treatment. An IRS official acknowledged the value 

23 According to the official, the agencies could change the Form 5500 to include 

participating employer information after the department complies with the legally required 

steps for implementing regulations, including regulatory analysis and notice-and-comment 

rulemaking, as well as requirements under the Paperwork Reduction Act of 1995 (Pub. L.

No. 104-13, 109 Stat. 163 (codified as amended at 44 U.S.C §§ 3501-3521)) and the 

Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. No. 104-121, tit. II 

110 Stat. 847, 857-74. Any added information would require changes to systems 

administered by Labor’s contractor, with the cost of such a change depending on the 

format of the change.
 

Page 9 GAO-12-665 Multiple Employer Plans 

that having access to participating employer information could have in 

targeting plans that may have such plan testing issues.

Besides participating employer information, Labor officials suggested that 

information identifying key MEP sponsor types or employer relationships 

may also be useful. As a possibility for gathering information about MEPs, 

Labor officials suggested requiring an initial Form 5500 filing immediately 

upon plan establishment. Another option would be to implement a 

registration requirement for newly-formed MEPs, though officials stated 

that Labor has no specific statutory authority to initiate collection of such 

information.

According to some MEP sponsors, reporting basic information about the 

number of participating employers in a MEP would not be burdensome. 

However, a few sponsors also told us that, to avoid creating complex and 

burdensome reporting requirements, agencies would need to carefully 

consider the information to be collected. For example, dynamic 

interrelationships among participating employers, such as one employer 

being a subsidiary of another, would require carefully defining the term 

“participating employer.”24 Nevertheless, a plan sponsor representative 

said participating employer information could be used for measuring a 

MEP’s cost-effectiveness.

 

24 For example, a MEP may include employers that have changing ownership interests in 

one another. If and when ownership interests with respect to two or more employers 

reaches certain levels set out in the IRC (26 U.C.S. § 1563), those employers would 

generally, in effect, be considered a single employer. 26 U.S.C. § 414(b) and (c). For 

MEPs that have a particularly large number of participating employers engaging in 

complex transactions, keeping track of the number and identities of participating 

employers may be burdensome. 
 

Page 10 GAO-12-665 Multiple Employer Plans 

The 2009 plan and sponsor-level Form 5500 data, the most current and 

complete year of data at the time of our analysis, show that MEPs 

comprise a relatively small portion of the universe of pension plans.25

Defined benefit and defined contribution MEPs each represent only 0.7 

percent of approximately 46,000 private sector defined benefit plans and 

approximately 654,000 private sector defined contribution plans. The vast 

majority of pension plans are single-employer plans. More specifically, 

MEPs account for only 318 defined benefit plans and 4,593 defined 

contribution plans. MEP sponsorship seems to be following the general 

trend away from traditional defined benefit plans and towards defined 

contribution plans. For example, from 2001 to 2009 the number of defined 

contribution MEPs appears to have grown by 20 percent, while the 

number of defined benefit MEPs shrank by over a third.26

 

25 While key, current information about participating employers is missing, we were able to 

identify important sponsor-level plan information from the 2001 and 2009 Form 5500 

filings. Additionally, we supplemented our data analysis with data from plan interviews.

(See fig. 1).

26 Though MEPs may follow more general pension trends in plan-type sponsorship, others 

suggest possible MEP-specific trends as well. Actuarial experts told us that certain 

requirements may make it particularly difficult to establish a defined benefit MEP today. 

Defined benefit MEPs established after 1988 must be funded as if each participating 

employer is funding a separate plan so that plan assets have to be allocated among the 

participating employers. 26 U.S.C. § 413(c)(4)(A). Plans established before 1989 that did 

not elect to be treated as plans established after 1988 must be funded as if all 

participating employers maintain one single-employer plan. 26 U.S.C. § 413(c)(4)(B). 

According to the experts, allocating assets across employers requires application of 

onerous, detailed allocation techniques that may result in certain employers receiving 

asset allocations that are disproportionate to their individual contributions. 

Disproportionate allocations may give certain participating employers the impression that 

the plan is inequitable—that is, for example, that certain employers are contributing more 

to the funding of the plan than they would have were the plan not funded separately, while 

other participating employers may receive particularly favorable asset allocations. Roughly 

37 percent of defined benefit MEPs were subject to the post-1988 funding rules as of the 

2009 plan year. See appendix I, table 1 for additional detail. 

MEPs Are a Small Portion 

of the Pension Plan 

Universe
 

Page 11 GAO-12-665 Multiple Employer Plans 

Figure 1: Number of Defined Benefit and Defined Contribution MEPs with Percent 

Change between Periods, 2001 and 2009

While MEPs represent a relatively small percentage of pension plans, 

based on available data, they appear to represent a somewhat larger 

percentage of pension assets. For example, defined benefit MEPs 

represented about $110 billion in plan assets as of 2009—about 6 

percent of all defined benefit assets. Defined contribution MEPs 

represented an estimated $175 billion in assets—also about 6 percent of 

all defined contribution assets.27

 

27 See appendix I, tables 2 and 3 for additional asset information.

The portion of all participants 
 

Page 12 GAO-12-665 Multiple Employer Plans 

represented by MEPs is generally similar to the proportion of all assets 

represented by MEPs. In 2009, defined benefit MEPs included about 2.2 

million participants—about 5 percent of all defined benefit plan 

participants. At the same time, defined contribution MEP participation 

grew—defined contribution MEPs currently cover over 4.5 million 

participants (about 5 percent of all defined contribution participants).28

 

28 Particularly for defined contribution plans in this instance, plan participation implies 

eligibility to contribute to the plan. Thus, some participants may not have account 

balances if they have not made or received contributions to the plan and, given the 

construction of the definition of participant in the Form 5500, our estimates include 

participants with zero account balances. For our analysis, we measured participants using 

the definition of total participants on the Form 5500 and Form 5500-SF (for small plans) 

which includes active; retired; separated vested participants not yet in pay status; and 

deceased participants whose beneficiaries are receiving or are entitled to receive benefits. 

The number of participants also includes double counting of workers in more than one 

plan. 

(See fig. 2.)
 

Page 13 GAO-12-665 Multiple Employer Plans 

Figure 2: Number of Defined Benefit and Defined Contribution MEP Participants 

with Change between Periods, 2001 and 2009

The preponderance of MEP assets and participants reside in a relatively 

small number of plans. Specifically, the largest 25 defined benefit MEPs 

ranked by number of participants represent nearly 76 percent of all 

defined benefit MEP assets and 72 percent of all defined benefit MEP 

participants. Similarly, the largest 25 comparably ranked defined 

contribution MEPs represent about 51 percent of all defined contribution 

MEP assets and about 41 percent of all defined contribution MEP 

participants. Three major sponsor types appear among the largest 25 

MEPs: large corporations, associations, and professional employer 

organizations (PEO). Additionally, we identified an emerging plan sponsor 

type that does not appear among the largest plans: the open MEP.

MEP Sponsorship Is Highly 

Concentrated among the 

Largest 25 Defined Benefit 

and Defined Contribution 

Plans
 

Page 14 GAO-12-665 Multiple Employer Plans 

Large, Fortune 500, or Fortune Global 500 corporations make up the 

majority of plan sponsors among the largest 25 MEPs (see figs. 3 and 4 

in appendix I).29

Each of the sponsors we interviewed among these large corporate MEPs 

told us their plans became MEPs as a result of their corporate structure or 

transactions under which some or all employers were no longer in the 

same controlled group.

For example, the defined benefit MEP maintained by 

General Electric is overall the third largest defined benefit plan in terms of 

total participants—representing 24 percent of all defined benefit MEP 

participants. The defined contribution MEP maintained by General 

Electric is the second largest defined contribution MEP and, when 

compared to all defined contribution plans, is the ninth largest defined 

contribution plan overall.

30 In other words, the MEP may cover a 

corporation and its subsidiaries that are not under common control of the 

parent corporation.31

 

29 All three of the sponsors we interviewed in this category had both defined benefit and 

defined contribution MEPs.

The large corporate MEP sponsors we interviewed 

reported few participating employers in their plans. One sponsor reported 

only two participating employers. The sponsor with the largest number of 

participating employers reported eight.

30 For most purposes, all employees of employers in the same controlled group are 

treated as employed by a single employer. 26 U.S.C. § 414(b). The status of these large, 

corporate plans as MEPs may be temporary if the transactions that resulted in them 

becoming MEPs are undone. For example, one plan sponsor representative we 

interviewed said that the sponsor’s defined benefit and defined contribution plans became 

MEPs in the early-to-mid 2000s as a result of a merger within a business segment. Not 

long after, however, that particular segment was spun-off from the company and, by 

sometime in 2012, both the defined benefit and defined contribution plans will no longer 

be MEPs, but may be single-employer plans.

31 The extent to which two or more corporations are considered in the same controlled 

group has to do chiefly with the percentage of ownership one has in the other. 26 U.S.C. § 

1563.

Large Corporate MEPs
 

Page 15 GAO-12-665 Multiple Employer Plans 

Association-sponsored plans also appear among the 25 largest defined 

benefit and defined contribution MEPs.32

In contrast to our interviews with the large corporations that did not have 

common control of one or more employers in the plan, the associations 

had long-standing, continuously operating MEPs that, in most cases, 

were established prior to the enactment of ERISA. Additionally, these 

associations included a relatively large number of participating 

employers—well over 100 in most cases—and tended to be organized 

around a common trade or industry that served smaller employers. Two 

of the associations we interviewed reported an average of between 20 

and 60 employees per participating employer.

The largest association-related 

defined benefit MEPs include the National Rural Electric Cooperative 

Association Retirement Security Plan, the United Benefits Group Co-op 

Retirement Plan, and the Pentegra Defined Benefit Plan for Financial 

Institutions. Among the largest defined contribution MEPs are The Young 

Men’s Christian Association Retirement Fund Retirement Plan and the 

National Rural Electric Cooperative Association 401(k) Pension Plan.

The association representatives we interviewed also said that they had a 

number of common operational structures. For example, each association 

had an appointed board made up of association members that served as 

the named fiduciary of the plan. Most of these associations required 

member representatives who sat on the association board to participate 

in the MEP.

Additionally, a number of the association representatives noted the many 

advantages of the MEP model for associations. For example, especially 

in the case of defined benefit plans, as long as a participant remains an 

employee of an employer within the association, they can change jobs 

and continue earning additional benefits and vesting service credit 

towards association plan benefits. Moreover, because MEPs can pool 

resources, the plans can offer a broad enough array of benefit options to 

satisfy association members and participants. In order to leverage 

 

32 For the purposes of identifying MEPs sponsored by association for this report, we found 

indications (e.g., terms like association, cooperative, farm bureau, etc.) in both the names 

and websites of MEP sponsors which we used to determine which MEPs were sponsored 

by associations. We did not assess whether these plan sponsors would meet Labor’s 

definition of “bona fide” association under ERISA. All four of the associations from which 

we interviewed representatives for our study also sponsored both defined benefit and 

defined contribution MEPs. 

Association MEPs
 

Page 16 GAO-12-665 Multiple Employer Plans 

economies-of-scale, the MEP must keep the number of investment and 

benefit options manageable. However, one expert we spoke with said that 

certain association plans have been very effective at offering efficient,

cost-effective retirement options for their members.

PEOs are the last sponsor type that appeared among the largest MEPs.33

Specifically, two PEOs existed among the list of the largest 25 defined 

contribution MEPs in 2009—the ADP Totalsource Retirement Savings 

Plan and the Gevity 401(k) plan.34 According to the National Association 

of PEOs (NAPEO), PEOs provide human resource services to their small 

business clients by processing and administering wage and tax payments

and assuming responsibility and liability for compliance with various state 

and federal laws and regulations.35

The PEO representatives we interviewed said their PEOs operated under 

what they referred to as a “coemployer” contract.

By NAPEO’s estimate, PEO 

arrangements include between 2 and 3 million employees.

36

 

33 We were unable to identify any PEOs that sponsored defined benefit MEPs, but 

interviewed representatives from three large PEO MEPs that exclusively sponsored 

defined contribution plans.

Though the term 

coemployer is not well-defined, according to the PEO sponsor 

representatives we interviewed, generally it means that a client employer 

signs a contract whereby the PEO assumes certain employer rights and 

responsibilities through the establishment and maintenance of an 

employer relationship with the workers assigned to its client. This usually 

includes administering a suite of human resources functions for the client 

such as payroll services, a worker’s compensation program, and a health 

insurance plan. Additional services may also be offered or required, but 

34 TriNet, also a PEO, acquired Gevity in 2009.

35 The NAPEO, until 1994, was known as the National Staff Leasing Association.

36 We did not find coemployer defined in federal statute and many states do not 

specifically regulate PEOs in any way. Because the term PEO is not well-defined either, 

and the actual services are contractually determined, some refer to certain PEO practices 

as “employee leasing” or “payrolling,” which involves providing administrative or financial 

services to employers, rather than serving as an employer in the sense of hiring or 

supervising workers. According to the Center for a Changing Workforce, in the late 1980s 

and early 1990s, many employee leasing firms went bankrupt or were forced out of 

business due to fraud, including payroll fraud and mishandling of employee retirement 

funds. See Center for a Changing Workforce, PEOs and Payrolling: A History of Problems 

and a Future without Benefits (Seattle, Washington: December 2001).

Professional Employer 

Organization MEPs
 

Page 17 GAO-12-665 Multiple Employer Plans 

each PEO representative we interviewed said their PEO also offered a 

401(k) defined contribution plan. According to one PEO representative, 

the PEO-sponsored 401(k) MEP was the fourth-most selected service 

option by clients. However, another PEO noted that the client could also 

sponsor a separate, non-MEP, single-employer plan—such as a 401(k)-

style defined contribution plan—if it so chose.

The PEOs from which we interviewed representatives offered many plan 

benefit features that could be highly customized to the client. For 

example, one PEO representative said their plan allows client employers 

to specify vesting schedules, choose among various levels of employer 

contributions or matches, and add profit-sharing features.37 The PEO 

representatives we interviewed said their PEOs had large numbers of 

participating employers in their plans.38 Each PEO-sponsored defined 

contribution plan had at least 400 participating employers, but one had 

about 2,700—nearly three times the largest number of participating 

employers that we estimated for 2001.39

According to pension experts familiar with the industry and our analysis, 

PEO-sponsored MEPs grew both in size and number after IRS issued 

guidance in 2002 that identified defined contribution MEPs as a plan 

The size of the typical client 

employer varied significantly and ranged both across and within industry 

sectors. For one PEO, the typical client employer had between 20 and 50 

employees, but the PEO also had a client with nearly 3,000 employees. 

Two PEO representatives reported that their PEOs serve a broad array of 

industry sectors, though one representative noted that client employers 

are generally in various “white collar” industries, such as health care or 

public relations.

 

37 Profit-sharing plans, or similarly stock bonus plans, are a type of defined contribution 

plan that give employees a share of company profits. More specifically, these plans are a 

feature of a defined contribution plan under which an employer may determine, annually, 

how much will be contributed to the plan out of profits or revenue. 

38 According to our analysis, two industries associated with the PEOs observed marked 

growth with respect to both the number of defined contribution plans and participants from 

2001 to 2009. Plan sponsors representing the “employment services” and “payroll 

services” industries combine to represent about 7 percent of MEPs and 10 percent of 

MEP participants. Notably, participation in plans represented by these industries saw a 

nearly three-fold increase over the 2001 to 2009 period and represent almost one-half 

million MEP participants as of 2009.

39 See appendix I, table 4 and figure 5 for additional analysis of data we tabulated on 

participating employers from the 2001 Form 5500. 
 

Page 18 GAO-12-665 Multiple Employer Plans 

design some PEOs could use to avoid plan tax disqualification.40

Though not found among the largest plans, our review found that another 

MEP sponsor type emerged in recent years. As PEO-sponsored MEPs 

continued to grow, one firm, TAG Resources, LLC, started a new type of 

MEP: a defined contribution plan it called an “open” MEP.

According to one plan sponsor, since the guidance was issued, MEPs 

have been the default plan design for PEOs—but the guidance did not 

address what constituted a PEO.

41

Since its inception in 2003, the TAG Resources open MEP grew to 

include 8,402 plan participants and about $64 million in assets at the end 

of the 2010 plan year. Another open MEP sponsored by 401kSafe, LLC 

was established in 2009 and already had 1,509 plan participants at the 

end of its 2010 plan year.

The key 

differences between PEO MEPs and open MEPs appear to be that open 

MEPs do not (1) offer payroll management or other administrative 

services PEOs typically offer, or (2) purport to be an employer of plan 

participants. Employers in open MEPs are related solely by their 

participation in the MEP.

42

While we identified only these two and two other open MEPs in Form 

5500 data,

According to its website, that plan had been 

maintained by the largest PEO in the southeastern United States and 

became an open MEP to expand its pension plan to non-PEO clients.

43

 

40 Rev. Proc. 2002-21, 2002 -19 I.R.B. 911. The IRS guidance provided relief to PEOs 

sponsoring plans for employees who were working at client worksites but paid by the PEO 

to provide services to the client pursuant to a contract. The IRC provides that an 

employer’s plan may be tax-qualified only if maintained for the exclusive benefit of its 

employees. 26 U.S.C. § 401(a)(2). The revenue procedure specified circumstances under 

which a PEO could cover employees located at client worksites under a pension plan by 

establishing a MEP with those client employers and thereby not violating the exclusive 

benefit requirement. 

we independently identified many more that were apparently 

too new to appear in the data but were actively soliciting clients online. 

Plan sponsor representatives at one open MEP we spoke with said the 

plan already had about 500 participating employers and was adding up to 

41 This plan is known as the 401K Advantage, LLC 401K Plan.

42 This plan is known as the 401K Safe, LLC Multiple Employer 401(K) Plan.

43 These plans were the Benefitguard Retirement Income Security Plan and the National 

Retirement Security Cash Balance Plan. 

Open MEPs
 

Page 19 GAO-12-665 Multiple Employer Plans 

30 employers per month. Additionally, we identified a consulting group 

that was designing open MEPs to be sponsored in such a way as to 

appeal to third-party service providers.44 The third-party service provider 

would tailor the design of the plan to appeal to clients who might 

ultimately adopt the MEP as participating employers.

Reflecting some of the content of the marketing material we reviewed 

from PEO MEPs and open MEPs, MEP representatives told us that MEPs 

provide several advantages for employers over single-employer plan 

sponsorship: reduced fiduciary liability, reduced administrative 

responsibility, and reduced cost.45 However, we found that these 

advantages may not always be unique to MEPs.46

Reduced fiduciary liability—According to all of the PEO and open MEP 

representatives we interviewed, the firms that offer MEPs take on some 

fiduciary duties that would otherwise remain solely with the employers if 

employers managed their own plans; however, exactly how much relief 

Based on our 

interviews with MEP representatives and the fact that, as stated earlier in 

this report, PEO and open MEPs are new and different compared to the 

other MEP types, it may be that PEO MEPs and open MEPs are the only 

MEP types marketing MEPs to employers. Consequently, the following 

section focuses on the advantages of MEPs overall in the context of how 

they would be presented to employers.

 

44Third-party service providers are outside professionals that may manage some or all of 

a plan’s day-to-day operations. These services can include investment management, 

consulting and providing financial advice, record keeping, custodial or trustee services for 

plan assets, telephone or web-based customer services for participants and other thirdparty administrative services.

45 The advantages and disadvantages identified in this section apply to whenever a 

sponsor can establish a MEP. Later in this report, we discuss how Labor and IRS 

regulatory interpretations influence MEP sponsorship, particularly with respect to open 

MEPs. 

46 In identifying individual alternatives to the possible advantages provided by MEPs, we 

did not assess whether these individual alternatives would be more appealing to an 

employer than the combination of advantages provided by MEPs.

MEP Advantages 

Marketed to 

Employers May Not 

Be Unique
 

Page 20 GAO-12-665 Multiple Employer Plans 

from liability, if any, the firm can provide to employers is unclear.47 In 

taking some of the fiduciary responsibility, these firms have control over 

the management or assets of the plan, which, according to one MEP 

representative, includes fund selection, due diligence in tracking the 

investment performance, and employee communication. Prior GAO work 

identified the burden of fiduciary liability as a possible impediment to 

small-employer plan sponsorship.48 According to one open MEP 

representative, reducing fiduciary liability is the primary reason employers 

participate in MEPs. Our prior work suggests this may be because some 

employers are not familiar with how to manage a plan. However, there 

may be other ways for employers to gain the same degree of reduced 

fiduciary responsibility as afforded by a MEP. For example, we found a 

firm marketing its willingness to establish and manage the investments of 

single-employer plans on the behalf of individual employers.49

In contrast to the claims made by some MEP representatives, several 

plan representatives and pension experts we spoke with said firms that 

offer MEPs cannot assume all fiduciary liability on behalf of the 

participating employer. Although a firm that offers a MEP can generally 

control the plan on behalf of the participating employers, as Labor notes 

on its website, at a minimum, the employers must still select a MEP to 

join, which is considered a fiduciary function, and retain responsibility to 

monitor the plan’s investments and fees. However, some MEP marketing 

materials we reviewed may give an impression that enrolling in MEPs 

eliminates fiduciary liability for employers entirely. Further, two of the

MEP representatives stated that MEPs did eliminate fiduciary liability for 

employers.

 

47 Under ERISA, a fiduciary is anyone who exercises any discretionary authority or 

discretionary control respecting management of a plan or exercises any authority or 

control respecting its assets or renders investment advice for a fee or compensation to the 

plan or has authority to do so. ERISA provides that a plan’s fiduciaries must carry out their 

responsibilities prudently and do so solely in the interest of the plan’s participants and 

beneficiaries. 29 U.S.C. §§ 1002(21) and 1104(a).

48 GAO-12-326. 

49 In a previous report, we noted that, unlike this firm, service providers sometimes do not 

acknowledge that they are plan fiduciaries even though plan sponsors assume them to be. 

When a service provider is not a plan fiduciary, it is not bound by the fiduciary duty under 

ERISA to act prudently and solely in the plan’s best interest. See GAO, Private Pensions: 

Fulfilling Fiduciary Obligations Can Present Challenges for 401(k) Plan Sponsors, 

GAO-08-774 (Washington, D.C.: July 16, 2008).
 

Page 21 GAO-12-665 Multiple Employer Plans 

Reduced administrative responsibility—All of the PEO and open MEP 

representatives we interviewed said firms that offer MEPs assume 

administrative responsibilities that employers would retain if they 

managed their own plans. Several MEP representatives said MEP 

administrators can complete the record keeping and annual testing, and 

submit required filings such as a single Form 5500 for the MEP on behalf 

of all the participating employers. Additionally, a couple of the 

interviewees said that employers not already offering plans might find it 

easier and faster to join a MEP than to create their own administrative 

structure with a single-employer plan. However, our prior work has shown 

that individual sponsoring employers can also use service providers to 

perform administrative functions similar to those that MEPs offer.50

Further, PEOs that offer payroll services may offer similar plan 

administrative services for small employers that sponsor a singleemployer plan through the PEO.51

Reduced cost—All of the PEO and open MEP representatives we 

interviewed thought that participating in MEPs may offer reduced costs as 

compared to single-employer plan sponsorship since participating 

employers can pool assets to obtain the lower pricing available to the 

larger plans. Additionally, several interviewees described how employers 

may not need to pay for additional services from third-party administrators 

or financial experts, which may be similar to what our prior work 

described as bundled services.

Consequently, it is unclear how, if at 

all, the administrative services offered by a MEP differ significantly from 

those offered for a single plan through a PEO. Finally, a couple of MEP 

representatives identified the difficulty involved with tracking some of the 

administrative tasks needed for a MEP if the participating businesses did 

not have a common payroll remitter. One pension expert thought that this 

complexity increased the chance that the MEP could fail to meet some of 

its administrative responsibilities.

52

 

50 See 

Further, while enrolling in MEPs can 

save time for employers without a prior plan, as mentioned earlier, a 

couple of interviewees said MEPs may also save money since the 

employer will not need to spend money to create an initial plan document 

for a new single-employer plan. Lastly, in some cases, a firm offering a 

GAO-12-326. 

51 See GAO-12-326. 

52 See GAO-12-326. 
 

Page 22 GAO-12-665 Multiple Employer Plans 

MEP is only required to conduct a single plan audit, which a few 

interviewees told us can be expensive for individual employers 

sponsoring their own plans. This may reduce costs for larger participating 

employers; however, employers with fewer than 100 participants are not 

required to audit their plans.

Overall, no consensus existed among MEP representatives and pension 

experts on whether or not MEPs such as PEO MEPs or open MEPs 

would substantially expand pension coverage. Several MEP 

representatives thought that MEPs had the potential to expand coverage, 

especially among small to mid-size employers that could benefit from the 

potential administrative and cost advantages. However, a couple of 

pension experts were skeptical that open MEPs would have much of an 

impact in expanding retirement plan coverage. For example, one pension 

expert said employee demand, rather than cost benefits offered by MEPs, 

drives whether or not a business sponsors a plan. In our prior work, small 

employers reported that employees may prefer to have health care 

coverage or may not be interested in participating in a retirement plan.53

There is also concern about whether MEPs are any more or less prone to 

abuse than other types of pension arrangements. Labor officials said the 

potential for inadequate employer oversight of the MEP is greater 

because employers have passed along so much responsibility to the 

entity controlling the MEP. Labor officials noted that potential abuses 

might include layering of fees, misuse of the assets, or falsification of 

benefit statements.

The pension expert also observed that small businesses do not 

extensively research retirement plans or actively seek them out. As a 

consequence, marketing may be the biggest determinant of MEP growth. 

Additionally, while a couple of the MEPs we spoke with had offerings for 

employers to start new plans through the MEP, several targeted 

businesses with existing plans. For example, an open MEP 

representative said their adopting employers usually have over 100 

employees or plan assets of $2 million to $5 million.

54

 

53 See 

One pension expert agreed that there was potential 

GAO-12-326. 

54 As an illustration of the potential risk, an individual acting as the trustee and fiduciary of 

several MEPs has been indicted for allegedly using plan funds for personal use and 

misrepresenting the fund investments to clients. Solis v. Hutcheson, 12-cv-236 (D. Idaho). 

The district court has entered a temporary restraining order removing defendant Matthew 

Hutcheson from plan administration and appointing an independent fiduciary to take 

control of plan assets.
 

Page 23 GAO-12-665 Multiple Employer Plans 

for MEPs to charge excess fees without the enrolled employer being 

aware of those fees.55

Finally, a number of interviewees identified the “bad apple rule” as a 

potential problem for MEPs. Specifically, in order to retain its tax-qualified 

status and the associated tax advantages for the employer and 

employees, IRS requires the firm offering the MEP to annually test each 

employer to ensure that the contributions or benefits provided under the 

plan do not discriminate against rank-and-file workers in favor of highly 

compensated employees.

While Labor officials acknowledged that singleemployer plans could be subject to similar abuses, they cautioned that 

MEPs’ structure and operation could make them particularly susceptible 

to such abuses.

56 If the tests find that one participating 

employer discriminated against its rank-and-file workers, this might cause 

the entire MEP to be considered noncompliant. However, many MEP 

representatives we had spoken with said that, to date, they had never 

needed to expel a participating employer because of noncompliance and 

that making voluntary compliance corrections with the IRS was not 

difficult.57

 

55 A GAO report found that single employers that sponsored plans may not be aware of 

the fees they were charged and likely paid more than they realized. See GAO, 401k 

Plans: Increased Education Outreach and Broader Oversight May Help Reduce Plan 

Fees, GAO-12-325 (Washington, D.C.: Apr. 24, 2012).

56 26 U.S.C. § 401(a)(4); 26 C.F.R. §§ 1.401(a)(4)-1, 1.401(a)(4)-4 and 1.413-2(a)(3)(iv) 

(2012). 

57 The firm offering the MEP can voluntarily resolve plan compliance problems through the 

IRS’s Employee Plans Compliance Resolution System. One MEP representative told us 

that IRS is helpful in correcting any compliance issues or mistakes.
 

Page 24 GAO-12-665 Multiple Employer Plans 

Labor and IRS treat MEPs differently because they are charged with 

interpreting different titles of ERISA.58 Labor is primarily responsible for 

interpreting and applying Title I of ERISA, which, among other things, 

defines an employee benefit plan.59 In contrast to Labor, IRS is 

responsible for determining whether plans qualify for preferential tax 

treatment under Title II of ERISA, which amended the IRC. For Labor’s 

purposes, under ERISA a plan can be maintained only by an employer, 

an employee organization, or both.60

Labor and IRS have not fully coordinated their statutory interpretations 

related to MEPs with Labor’s advisory opinions. On May 25, 2012, Labor 

issued two advisory opinions on open MEP arrangements and found an 

open MEP was not a single employee benefit plan under Title I of 

ERISA.

For the IRS’s purposes, the IRC 

does not contain a definition of “employee benefit plan,” nor does it 

include any explicit requirement that a plan be maintained by an employer 

or an employee organization.

61,62

 

58 Title II of ERISA amended the IRC. Although those provisions are, therefore, usually 

thought of and referred to only as part of the IRC, they were enacted as part of ERISA. 

ERISA, §§ 1001-2007, 88 Stat. 898-994.

However, applying tax law, IRS has found at least one open 

59 29 U.S.C. § 1002(3).

60 29 U.S.C. § 1002(1) and (2). Therefore, unless a plan is maintained by an employee 

organization such as a union, it can only be maintained under ERISA by an employer. The 

Title I definition of employer is “any person acting directly as an employer, or indirectly in 

the interest of an employer, in relation to an employee benefit plan; and includes a group 

or association of employers acting for an employer in such capacity.” 29 U.S.C. § 1002(5). 

Under its advisory opinions, Labor has long looked at certain factors, such as pre-existing 

relationships among employers, to determine if a group of employers constitutes a bona 

fide association of employers that may, therefore, sponsor a single employer plan under 

Title I of ERISA. Pension and Welfare Benefits Admin., U.S. Dept. of Labor, Advisory 

Opinion 83-15A, 1983 ERISA Lexis 43.

61 Department of Labor Advisory Op. 2012-04A was issued to an operating open MEP. In 

addition, on May 25, 2012, Labor released another relevant opinion. Department of Labor 

Advisory Op. 2012-03A was issued to a firm interested in maintaining a MEP comprised of 

the abandoned plans of multiple employers.

62 While we note that Labor and IRS have not coordinated their statutory interpretations 

more broadly, the agencies did directly collaborate on the advisory opinions themselves. 

According to agency officials, Labor, IRS, and PBGC extensively discussed Labor’s two 

recently issued advisory opinions related to MEPs prior to their publication.

IRS and Labor Treat 

MEPs Differently, 

Reflecting a Lack of 

Coordination
 

Page 25 GAO-12-665 Multiple Employer Plans 

MEP, operating since 2003, qualified for preferential tax treatment.63 IRS 

officials said IRS does not take into consideration a MEP’s status under 

Title I of ERISA when considering whether it qualifies for preferential tax 

treatment. IRS focuses solely on compliance with IRC provisions. In the 

advisory opinions, Labor, and more specifically EBSA, opined that it 

considers the participating employers in an open MEP to be sponsoring 

their own plans for their own employees. The advisory opinions mean that 

an open MEP is simultaneously considered both a single plan by IRS, for 

purposes of certain tax laws, and a series of plans by Labor.

64 This 

presumably means that an open MEP will have to file annual reports on 

behalf of each individual employer to satisfy Labor and also as one single 

plan to satisfy IRS. Filing both ways would create duplications in reporting 

and redundancies in Form 5500 data.65

The May 25th advisory opinions are the latest in a series of advisory 

opinions dating back to at least the late 1970s on benefit plans 

maintained by multiple employers.

66

 

63 While the opinion clarified that open MEPs are not considered single-employee benefit 

plans under ERISA, the opinion does not preclude the possibility of IRS determining that 

an open MEP qualifies for preferential tax treatment under the IRC. Indeed, the advisory 

opinion specifically states that Labor was not expressing any opinion on the tax-qualified 

status of pension plans that cover employees of multiple employers.

On both MEWAs (arrangements 

providing welfare benefits such as health coverage) and MEPs, Labor has 

held that multiple employers may maintain a single plan through a bona 

fide employer group or association of employers. However, Labor has 

been careful to define the nature of such an association in advisory 

64 EBSA is the entity within Labor that determines what constitutes an employee benefit 

plan under Title I of ERISA. However, PBGC, which is also within Labor, defines a MEP 

differently for purposes of Title IV of ERISA, and uses a definition based on whether plan 

assets are available to pay the benefits of all participants and beneficiaries, according to 

PBGC officials.

65 As an additional example, the IRC requires pension plans subject to ERISA’s vesting 

requirements to report annually (using IRS Form 8955-SSA) on information such as the 

names and taxpayer identification numbers of plan participants who have separated from

the plan and are entitled to deferred vested benefits but received none during the year. 26 

U.S.C. § 6057(a)(1). As part of a qualified MEP it is not clear whether participating 

employers must submit this form to IRS or not.

66 For example, in 1983, Labor opined that over 100 agencies affiliated with a local United 

Way lacked the relationship necessary to sponsor a single employee pension benefit plan 

under ERISA, even though they coordinated services and made a common appeal for 

donations. Pension and Welfare Benefits Admin., U.S. Dept. of Labor, Advisory Opinion 

83-21A, 1983 ERISA Lexis 38.
 

Page 26 GAO-12-665 Multiple Employer Plans 

opinions.67 A bona fide association may establish a plan because Labor 

considers the association to be an “employer” under section 3(5) of 

ERISA.68 Labor clarified in the May 25th opinions that it interprets the 

term “employer” in ERISA as having the same meaning whether applied 

to MEWAs or MEPs.69

Labor and Treasury are required to coordinate under ERISA.70 Labor and 

IRS have discussed these issues, but they have not coordinated to 

develop rules, policies, or practices to reduce the duplication of reporting 

and the burden of compliance with ERISA. IRS officials said they 

recognize the need to work with Labor on these issues, but they have not 

yet formulated the changes that may need to be implemented. Labor and 

IRS maintain an agreement relating to coordinating investigations 

generally, but the agreement does not include any coordination of 

statutory interpretations reflected in Labor’s advisory opinions related to 

MEPs. 

Labor’s May 25th advisory opinions have implications for those 

administering or planning to administer an open MEP. These opinions 

clarify that reporting, auditing, and bonding requirements—which MEPs 

applied across participants in the aggregate—must be applied to each 

 

67 According to Labor officials, a PEO does not represent a bona fide association but 

establishes an employer relationship with the employees of its clients through the services 

it offers them. A bona fide association is established in part when participating employers 

control the plan.

68 29 U.S.C. § 1002(5).

69 Labor’s advisory opinions on MEWAs may have been prompted by abuses by their 

promoters. Labor officials said not long after Congress enacted ERISA, Labor began 

enforcement actions against MEWA operators for charging excessive administrative fees 

and leaving plans unable to pay promised benefits, among other abuses. See GAO, 

Employee Benefits: States Need Labor’s Help Regulating Multiple Employer Welfare 

Arrangements, GAO/HRD-92-40 (Washington, D.C.: Mar. 10, 1992). When state 

insurance regulators found such practices violated their insurance laws, MEWAs claimed 

to be ERISA-covered plans preempted from state regulation. According to a Labor official, 

the MEWAs that failed to maintain adequate funds to pay promised benefits were often 

comprised of otherwise unrelated employers. Labor is still confronting challenges 

stemming from participant abuses. On December 6, 2011, under new authority Labor was 

granted by the Patient Protection and Affordable Care Act (Pub. L. No. 111-148 § 6606, 

124 Stat.119, 781, (codified at 29 U.S.C. § 1021(g) (2010), Labor proposed new reporting 

requirements to better regulate MEWAs. 76. Fed. Reg. 76,222. (Dec. 6, 2011).

70 29 U.S.C. § 1204.

Labor’s Response to Open 

MEPs Leaves Unanswered 

Compliance Questions
 

Page 27 GAO-12-665 Multiple Employer Plans 

participating employer in an open MEP. Employee benefit plans under 

ERISA are subject to ERISA’s fiduciary provisions and are required to file 

an annual report with Labor (using a Form 5500).71

The advisory opinions will likely prompt a range of responses according to 

those we interviewed. Two open MEP representatives reported they will 

take steps to bring their arrangements into compliance. An open MEP’s 

fiduciaries can conduct new plan audits, assure employer compliance 

with ERISA fidelity bond requirements, and file Form 5500s for each 

employer, according to an open MEP representative and a pension 

expert. Others will likely exit the market, according to one pension expert. 

Some representatives of MEPs sponsored by PEOs and associations 

reported that the opinions had no impact on their plans.

Labor may fine plan 

administrators who fail to file an annual report up to $30,000 per year until 

the report is filed.

The advisory opinions may also affect federal oversight of open MEPs. A 

pension expert said open MEPs would be more likely to be selected for 

an IRS audit as a result of the increased reporting. The pension expert 

also suggested that disaggregating open MEPs into their underlying 

ERISA plans may reveal prohibited transactions that were not obvious 

before.72

The advisory opinions could also lead to higher costs for open MEPs. 

Treating participating employers as plan sponsors will be expensive, 

according to some MEP representatives and pension experts. Some open 

MEP representatives said firms would pass costs associated with 

compliance on to plan participants. One representative estimated 

administrative fees covering plan maintenance costs could increase by up 

to 50 percent and that increased costs will create a disincentive to plan 

formation and contract pension coverage.

MEP sponsors have already raised questions about the broader 

applicability of the advisory opinions. Specifically, they have made 

informal inquiries to Labor as to whether their pension benefit 

 

71 29 U.S.C. §§ 1002(21) and 1104, and 1023(a)(1), respectively.

72 Certain transactions between plans and parties-in-interest or fiduciaries are statutorily 

prohibited. Such transactions generally include activities that could be characterized as 

forms of self-dealing and other conflicts of interest. 29 U.S.C § 1106.
 

Page 28 GAO-12-665 Multiple Employer Plans 

arrangements are in fact open MEPs. Labor officials encouraged those 

sponsors to submit a formal request for an advisory opinion. Labor 

officials said each advisory opinion is based on the facts presented and, 

as established under its procedure for advisory opinions, only the parties 

described in the request for the opinion may rely on the opinion. However, 

advisory opinions provide a legal interpretation of ERISA and a 

discussion of factual situations that may be useful to persons not subject 

to it. Labor officials said that they issued opinions on two different plan 

structures to show that the agency’s reasoning would hold under various 

circumstances.

Compliance assistance from Labor or IRS would help open MEP 

sponsors navigate the compliance requirements, according to two 

pension experts. One pension expert said that prompt guidance would be 

vital since certain plan sponsors submit requests for IRS determinations 

of their plans’ tax-qualified status on a 5-year cycle, and MEPs are in 

such a cycle now.73 However, IRS officials reported that as of June 21, 

2012, they were still in the process of analyzing Labor’s advisory 

opinions, and did not yet know if they would need to change their 

determination procedures accordingly. IRS officials told us it was 

premature to consider changes to their determination procedures until 

they analyze the full impact of the opinions and more fully discuss them 

with Labor. IRS officials noted any such change would necessitate an 

outreach program to employers and practitioners. Labor officials said they 

are responding to inquiries by open MEPs on a case-by-case basis as 

part of their normal compliance and enforcement activities.74

Policy questions may still need to be addressed. One pension expert 

explained that while Advisory Opinion 2012-04A clarified Labor’s position 

on open MEPs, it did not explain Labor’s underlying policy concerns in 

detail. The opinion also did not provide Labor’s view on the potential of 

open MEPs to lower plan costs or expand coverage. One pension expert 

suggested Labor officials may have felt bound to the agency’s prior 

position by decades of existing precedent. However, another pension 

 

73 The cycle for multiple employer plans is “cycle B” and the current determination letter 

submission period opens on February 1, 2012, and ends on January 31, 2013.

74 For example, Labor officials told us they intend to address open MEP compliance 

issues such as prohibited transactions through the established processes of EBSA 

regional offices.
 

Page 29 GAO-12-665 Multiple Employer Plans 

expert suggested Labor could have deemed open MEPs to be plans 

under ERISA but gave greater weight to its objective of ensuring benefit 

security. Both open MEP representatives and these pension experts said 

open MEP-like designs will continue to receive the attention of 

policymakers, given interest in expanding pension coverage.75 Pension 

experts also cautioned that any legislative change allowing certain open 

MEPs should ensure that there are appropriate safeguards to protect plan 

participants.76

MEPs are touted by some as a way for small employers to centralize 

administration and reduce pension plan costs. However, given that no 

data are collected on participating employers in MEPs, pension experts 

and agency officials cannot determine how employers utilize MEPs, let 

alone how beneficial the MEP design may be to employers and plan 

participants. While MEPs have long been affiliated with associations or 

complicated employer relationships, new sponsor types have emerged 

that call into question the current understanding of these relationships, 

which are a key aspect of ERISA’s requirements on employee benefit 

plans. Furthermore, it appears that actions taken by IRS, while providing 

some relief to certain PEOs has fostered the adoption of these new 

sponsor types of MEPs, including the most recent: “open” MEPs. Yet, at 

this time, no one knows for certain how many open MEPs there are, who 

is in them, or how they may affect future pension coverage. To identify 

ways to assess, mitigate, and monitor risks of MEPs in the future, Labor 

 

75 For example, one California proposal would provide for a retirement savings trust 

administered by the state and generally require employers with five or more employees to 

offer a payroll deposit arrangement so employees could contribute part of their pay to an 

account in that retirement savings trust. Calif. SB 1234 (2012). Effective June 20, 2012, 

Massachusetts permits the state treasurer to administer a plan for small, nonprofit 

employers after getting “approval” from the IRS and assurances that the plan is consistent 

with ERISA. Mass. Gen. Laws ch. 29, § 64E (2012). We did not assess whether such 

arrangements would operate as private sector or governmental plans, any preemption 

issues, or whether they could be structured as bona fide MEPs consistent with Labor’s 

recent advisory opinions. State and local government plans are excepted from coverage 

under Title I of ERISA.

76 Specifically, one expert suggested a safe harbor design may be an ideal model for an 

open, defined contribution MEP. A safe harbor 401(k) must provide for mandatory 

employer contributions that are fully vested when made. The safe harbor 401(k) plan is 

not subject to the annual nondiscrimination tests that apply to traditional 401(k) plans. 26 

C.F.R. § 1.401(k)-3 (2012).

Conclusions
 

Page 30 GAO-12-665 Multiple Employer Plans 

needs comprehensive and more current information about MEPs and 

their designs.

There also appears to be a lack of coordination between IRS and Labor 

on the application of different statutory requirements to MEPs. Newer 

MEP designs appear to be a result of practitioners interpreting IRS 

guidance on their tax-qualified status as a broader endorsement of their 

plan designs. However, following the IRC, IRS does not take into account 

ERISA Title I standards for employee benefit plans when determining taxqualified status. The IRS may continue to find that an open MEP qualifies

for preferential tax treatment and promoters may use such qualification as 

a tool for marketing their arrangements to employers—even though Labor 

does not consider an open MEP to be a single employer benefit plan 

under ERISA. Inadequate coordination, rather than setting the 

groundwork for sound, sensible, and cost-efficient oversight, is likely to 

lead to future compliance uncertainty and may ultimately risk participants’ 

retirement security.

Labor’s recently issued advisory opinions, consistent with previous 

opinions on employee benefit plans, establish that a common 

employment nexus or other genuine organizational relationship unrelated 

to the provision of benefits is required to maintain a pension plan among 

multiple employers. Labor’s expectation is that the recently issued 

opinions on open MEPs will serve as guidance to the pension industry at 

large. However, the application of such specific opinions is not always 

clear, and may be shaped by future requests for additional advisory 

opinions.

The Secretary of Labor should direct the EBSA to take the lead in 

gathering useful oversight information about the employers that 

participate in MEPs. A likely source for collection of this data would be the 

Form 5500, as it is the primary source of private pension data for 

government oversight activities.

The Secretary of Labor should instruct the Assistant Secretary of EBSA 

and the Secretary of the Treasury should instruct the Commissioner of 

Recommendations for 

Executive Action

Labor

Labor and Treasury
 

Page 31 GAO-12-665 Multiple Employer Plans 

Internal Revenue to formalize their coordination with regard to the 

statutory interpretations reflected in Labor’s advisory opinions related to 

MEPs. Furthermore, the agencies should coordinate to develop 

compliance-related guidance on the establishment and operation of 

MEPs under ERISA and the IRC.

We provided a draft of this report to Labor, Treasury (specifically including 

IRS), and PBGC for their review and comment. Labor, Treasury and 

PBGC provided written comments, which are reproduced in Appendix II, 

III, and IV respectively. PBGC and Labor provided technical comments, 

which we incorporated where appropriate.

The agencies generally agreed with the findings and conclusions of the 

report. Additionally, they expressed a commitment to expanding 

retirement plan coverage while also protecting the retirement benefits of 

workers, retirees and their families. GAO shares this commitment to 

expanding and promoting pension coverage in a manner that bolsters the 

retirement security of American workers. However, largely due to a lack of 

data, we could not fully examine how MEPs are utilized by employers or 

how they affect pension coverage overall. With better information to 

permit appropriate oversight, new MEP designs may prove to be viable 

options for sponsors and participants. 

The agencies generally agreed with the recommendation on data and 

suggested that, as part of their regular evaluations of changes to the 

Form 5500, they would consider the merits of alternative methods of 

collecting additional data about employers that participate in MEPs, 

among other possible changes to the Form 5500. We believe that such 

an evaluation is an important first step in determining how to collect useful 

information on employers that participate in MEPs.

The agencies also agreed with our recommendation to provide for 

coordination of the statutory interpretations of Title I of ERISA and Title II 

of ERISA (as reflected in the IRC) in connection with MEPs. We are 

encouraged that that the agencies coordinated on the advisory opinions 

to some extent during their development and issuance—consulting on the 

text of the opinions, making revisions, and discussing issues arising from 

their issuance. We added language in our report to reflect this 

coordination. Additionally, we modified the recommendation to 

acknowledge that there are a variety of mechanisms they could use to

improve and formalize their coordination. Labor and IRS said they would 

amend their coordination agreement when compliance issues become 

Agency Comments 

and Our Evaluation
 

Page 32 GAO-12-665 Multiple Employer Plans 

more apparent or if the impact of the advisory opinions suggests such 

coordination would be helpful. 

While our recommendation did not specify how or when the agencies 

should modify or formalize coordination agreements on statutory 

interpretations, we believe that it would be prudent to do so sooner rather 

than later. With respect to mechanisms for formalizing future coordination 

of statutory interpretations on MEPs in a more deliberative way, the 

agencies could modify their existing agreement on investigations or, if 

more appropriate, the agencies could initiate a new agreement, for 

example, via a memorandum of understanding or similar document. 

Further, our report contains evidence that the conditions the agencies 

believe would warrant modifying or formalizing agreements are already 

evident, namely concerns about compliance and the possible impacts of 

the opinions. Additionally, our report notes that the advisory opinions do 

not preclude the IRS from determining that open MEPs qualify for 

preferential tax treatment in the future. Currently, each of the three 

primary agencies regulating MEPs uses different criteria to define these 

plans for plan sponsors and administrators. Absent coordinated federal 

decisions, the potential exists for uncertainty within the regulated 

community and confusion for employers. By coordinating their statutory 

interpretations and subsequent guidance, these agencies could start to 

help create a clear, unified regulatory environment to optimize the 

potential for MEPs as an effective vehicle of pension coverage.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 21 days from the 

report date. We are sending copies of this report to the Secretary of 

Labor, the Secretary of the Treasury, the Director of PBGC, and other 

interested parties. This report is also available at no charge on the GAO 

website at http://www.gao.gov. 

If you or your staff have any questions regarding this report, please 

contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for 
 

Page 33 GAO-12-665 Multiple Employer Plans 

our Offices of Congressional Relations and Public Affairs can be found on 

the last page of this report. Key contributors are listed in appendix V. 

Sincerely yours,

Charles Jeszeck

Director, Education, Workforce,

 and Income Security Issues
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 34 GAO-12-665 Multiple Employer Plans 

To determine the largest multiple employer plan (MEP) sponsors and 

other key MEP characteristics, we analyzed electronic Form 5500 

information, the primary source of private pension data.1

Problems with the electronic data of the Form 5500 have been previously 

documented.

We analyzed 

2009 Form 5500 information, the most current and complete year, and 

also used 2001 information to compare trends over time. We chose 2001 

Form 5500 data as the comparison year because 2001 information is 

known to have fewer errors than certain prior years. The 2001 data also 

includes the Schedule T, which allowed us to estimate employers 

participating in MEPs for that year.

2

We chose to use “raw” 5500 data rather than Labor’s research files 

because the research data do not specifically focus on MEPs. According 

to Employee Benefits Security Administration (EBSA) officials, the 

research data are cleaned for common mistakes and the main focus of 

the effort is to assure that the historical relationship between single and 

multiemployer plans is accurate. Thus, the research data are not 

specifically cleaned with respect to MEP identification. Thus, MEPs may 

be recoded in the research data to single or multiemployer plans and 

there is no specific effort to better identify MEPs in the data.

However, we took steps to assess the reliability of the data 

and determined the data to be sufficiently reliable for our purposes. For 

example, we performed computer analyses of the data and identified 

inconsistencies and other indications of error and took steps to correct 

inconsistencies or errors. A second analyst checked all computer 

analyses.

We found the Department of Labor’s (Labor) characterization of MEPs in 

the research files not to be well-suited for our analysis. Labor’s research 

data appear to recode a sponsor’s indication of MEP status using an 

inconsistent method. This inconsistency is noted in certain Labor 

 

1 Relatedly, Labor notes that the data collected for the Form 5500 is not easily used to 

determine the number or characteristics of MEPs because the research data files and the 

methodology underlying the analysis is designed to support Labor’s statistical 

categorization and not designed to separately identify MEPs.

2 See GAO, Retirement Income Data: Improvements Could Better Support Analysis of 

Future Retirees’ Prospects, GAO-03-337 (Washington, D.C.: Mar. 21, 2003). 

Appendix I: GAO Analysis of Multiple 

Employer Plan Data
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 35 GAO-12-665 Multiple Employer Plans 

publications.3

We also found that that Labor does not consistently recode MEPs in the 

Form 5500 research file according to collective bargaining status—which 

violates the stated allocation rules in the footnotes of the pension bulletin. 

Certain MEPs that include participants that are subject to collective 

bargaining may be recoded as single-employer plans.

For example, Labor does not publish basic pension plan 

information about MEP sponsorship in its Private Pension Bulletins. The 

bulletins include only information about single-employer and 

multiemployer plans and include MEPs as either a single- or 

multiemployer plan type. In the footnotes, which disclose how MEPs are 

allocated across the single- and multiemployer categories, indication of 

collectively bargained participants in the MEP is the key determinant. For 

example, one of the footnotes indicates that if the MEP includes 

collectively bargained participants it would be characterized as a 

multiemployer plan in the bulletin. This is inaccurate—and at odds with 

the Form 5500 instructions—as MEPs may or may not include 

participants that are subject to collective bargaining; however, the 

collective bargaining agreement does not define the conditions and 

maintenance of the plan as it does for a multiemployer plan. Further, MEP 

administrators pay single-employer premiums for the MEP as a whole for 

purposes of Pension Benefit Guaranty Corporation (PBGC) insurance.

For our analysis we made no attempt to recode plan types, notably for 

those plans identified as MEPs. Labor officials told us that certain plans 

may be mistakenly identified as MEPs on the Form 5500, but may 

actually be another plan type. However, to identify such mistakes would 

require detailed and time-consuming review of plan and sponsor 

documentation that is not publically available and may not be definitive. 

Thus, our analysis of MEP and other plan types is limited to the selfreported plan status as indicated by the Form 5500 filer.

Given that little information about MEPs is known or publically available, 

we have included additional tables and figures from our analysis that 

were not included in the body of this report. These figures and tables 

 

3 See U.S. Department of Labor Employee Benefits Security Administration, Private 

Pension Plan Bulletin Historical Tables and Graphs, 2009 Data Release Version 1.2 

(Washington, D.C.: March 2012) and U.S. Department of Labor Employee Benefits 

Security Administration, Private Pension Plan Bulletin: Abstract of 2009 Form 5500 Annual 

Reports, Version 1.0 (Washington, D.C.: December 2011).
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 36 GAO-12-665 Multiple Employer Plans 

include information about the largest MEPs, plan funding methods, key 

sponsor industries, and participating employer information culled from 

Schedule T attachments.
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 37 GAO-12-665 Multiple Employer Plans 

Figure 3: Top 25 Plan Sponsors of Defined Benefit MEPs, as Measured by Total Plan Participants, 2009
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 38 GAO-12-665 Multiple Employer Plans 

Figure 4: Top 25 Plan Sponsors of Defined Contribution MEPs, as Measured by Total Plan Participants, 2009
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 39 GAO-12-665 Multiple Employer Plans 

Table 1: Percentage of Defined Benefit MEPs, by Reported Funding Method, 2009

 Percent of defined benefit MEPs

Post-1988 funding method 37.2

Pre-1989 funding method 59.1

Source: GAO analysis of 2009 Form 5500 data.

Note: If the “post-1988 funding method” is filed for a defined benefit MEP, the plan is funded as if 

each employer maintains a separate plan. This funding method is required for plans established after 

December 31, 1988, or, if the plan was established earlier, those plans which made a one-time 

election (some time after November 10, 1988, but before November 11, 1990) to fund as if each 

employer maintains a separate plan. If “pre-1989 funding method” is filed for a MEP, the plan is 

funded as if all participants were employed by a single employer. Values may not add to 100 percent 

as some plans do not specify the above funding method. 

Table 2: Total Plan Assets of MEPs, by Plan Type and Plan Year

Dollars in billions

2001 2009 2001 - 2009 change

Defined benefit plans 113.8 110.5 -3%

Defined contribution plans 150.2 175.4 17%

Source: GAO analysis of 2009 and 2001 Form 5500 data.

Note: Defined benefit plan assets are the actuarial value of assets. The measurement of this reported 

value of assets changed as a result of the Pension Protection Act of 2006. Pub. L. No.109-280, § 

102, 120 Stat. 780, 789-809. As a result these measures may be different over time. Defined 

contribution plan assets are the end-of-year total assets reported on either the Form 5500 schedule H 

(for large plans), schedule I (for small plans), or the Form 5500-SF (for certain small plans). 

Table 3: Percentage of All Assets Represented by MEPs, by Plan Type and Plan 

Year

2001 2009 2001 - 2009 change

Defined benefit plans 6.5 5.6 -14%

Defined contribution plans 9.1 5.6 -39%

Source: GAO analysis of 2001 Form 5500 data.
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 40 GAO-12-665 Multiple Employer Plans 

Table 4: MEP Participating Employer Estimates, Mean, Median and Maximum 

Employers, 2001

Mean number of 

participating 

employers 

associated with 

MEPs, by plan 

type, 2001

Median number 

of participating 

employers 

associated with 

MEPs, by plan 

type, 2001

Maximum number 

of participating 

employers 

associated with 

MEPs, by plan 

type, 2001

Defined benefit plans 16 2 862 

Defined contribution plans 9 2 999 

Source: GAO analysis of 2001 Form 5500 data.

Note: Under a MEP, some qualification requirements are applied as if all employees of each 

employer are employed by a single employer (e.g., 26 U.S.C. §§ 401(a) (exclusive benefit), 410(a) 

(participation), and 411 (vesting)). 26 U.S.C. 413(c)(1)-(3). Prior to 2004, certain plans would file a 

Schedule T to substantiate compliance with minimum coverage requirements. For purposes of 

Schedule T, each controlled group and each other employer that have employees benefiting under a 

plan that benefits the employees of more than one employer are referred to as “participating 

employers.” Up until 2004, the schedule T was only required every third year for certain employers, 

while other employers were to file it annually. Thus, these figures are estimates of a sample of MEPs 

for 2001. There were 3,307 (or 87 percent of the total of 3,796 identified) MEP defined contribution 

plans and 388 (or 81 percent of the total 478 identified) MEP defined benefit plans that filed a 

Schedule T in 2001. Additionally, employers reporting only one participating employer are assumed to 

not have a reporting requirement for 2001. 
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 41 GAO-12-665 Multiple Employer Plans 

Figure 5: Percentage of MEPs by Range of Participating Employers in the Plan, 

2001 Estimate

Note: Data reflects only those that reported two or more participating employers. Those MEP 

sponsors that did not file participating employer reports, also known as the Schedule T attachment to 

the Form 5500, are not shown. Additionally, employers reporting only one participating employer are 

assumed to not have a reporting requirement for 2001. 

Table 5: Maximum Number of Participants and Percentage of Participants in MEPs 

by Sponsor Industry and by Plan Type, 2009

 Sponsor industry Participants

Participants as 

percentage of 

all MEP 

participants

Defined benefit plans Other Electrical Equipment 

& Component 

Manufacturing

547,129 25.0%

Defined contribution 

plans

Hospitals 290,855 6.4%

Source: GAO analysis of 2009 Form 5500 data.
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 42 GAO-12-665 Multiple Employer Plans 

Table 6:Maximum Number of MEPs and Percentage of MEPs by Sponsor Industry 

and by Plan Type, 2009

 Sponsor industry Plans

Plans as a 

percentage 

of all MEPs

Defined benefit plans Religious, Grantmaking, Civic, 

Professional, & Similar 

Organizations

44 13.8%

Defined contribution plans Offices of Physicians (except 

mental health specialists)

282 6.1%

Source: GAO analysis of 2009 Form 5500 data.

Table 7: Percentage of Benefit Types Represented within Each Defined Benefit Plan 

Type, 2009

Multiple 

employer

Single 

employer Multiemployer

Hybrid/cash balance 16.0 14.7 1.6

Other/undefined defined benefit plan 1.9 2.6 10.3

Primarily flat dollar benefits 6.9 8.1 66.1

Primarily pay related benefits 75.2 74.6 22.0

Source: GAO analysis of 2009 Form 5500 data.

Table 8: Percentage of Pension Feature Types Represented within Each Defined 

Contribution Plan Type, 2009

 Multiple employer Single employer Multiemployer

401k plan 87.0 76.6 28.8

Profit sharing plan 9.1 17.3 25.6

Stock bonus plan 0.2 0.7 0.5

Target benefit plan 0.2 0.1 0.5

Money purchase plans 2.0 2.4 38.2

Annuity-403(b)(7) 1.1 2.6 2.5

Custodial account-403(b)(7) 0.1 0.1 0.0

Other defined contribution 0.3 0.2 3.8

Source: GAO analysis of 2009 Form 5500 data.

Note: Defined contribution plan features generally follow the order of the feature categories assigned 

in Labor’s Private Pension Plan Bulletins Abstract of Form 5500 Annual Reports. Although a plan may 

list multiple defined contribution pension plan features, we assign such plans to only one pension 

feature code from the above list—giving primacy to the codes in order of the above listing. For 

example, a plan could list both a 401(k) plan feature along with a stock bonus plan feature; however 

we list it as a 401(k) plan because the 401(k) plan feature is the primary listing above. Alternatively, 

“other defined contribution” is assigned last in the list and thus “other defined contribution” includes no 

plan features that are listed above it. 
Appendix I: GAO Analysis of Multiple 

Employer Plan Data 

Page 43 GAO-12-665 Multiple Employer Plans 

Table 9: Percentage of Defined Contribution Plans by Single, Multiple, and Multiemployer Plan Status by Range of Plan 

Participants, 2009

 

10,000 or more 

participants 

5,000-9,999 

participants

1,000-4,999 

participants

100-999 

participants

less than 100 

participants

MEP 1.5 1.5 8.9 34.6 53.4

Single-employer plan 0.1 0.1 0.9 9.1 89.7

Multiemployer plan 4.8 6.5 32.1 39.2 17.3

Source: GAO analysis of 2009 Form 5500 data.

Table 10: Percentage of Defined Benefit Plans by Single, Multiple and Multiemployer Plan Status by Range of Plan 

Participants, 2009

 10,000 or more 

participants

5,000-9,999 

participants

1,000-4,999 

participants

100-999 

participants

less than 100 

participants

MEP 10.5 7.5 19.9 35.6 26.6

Single-employer plan 0.8 0.8 4.4 13.8 80.1

Multiemployer plan 12.4 8.0 39.6 37.7 2.2

Source: GAO analysis of 2009 Form 5500 data.
Appendix II: Comments from the Department 

of Labor

Page 44 GAO-12-665 Multiple Employer Plans 

Appendix II: Comments from the Department 

of Labor
Appendix II: Comments from the Department 

of Labor

Page 45 GAO-12-665 Multiple Employer Plans 
Appendix III: Comments from the Department 

of the Treasury

Page 46 GAO-12-665 Multiple Employer Plans 

Appendix III: Comments from the 

Department of the Treasury
Appendix III: Comments from the Department 

of the Treasury

Page 47 GAO-12-665 Multiple Employer Plans 
Appendix IV: Comments from the Pension 

Benefit Guaranty Corporation

Page 48 GAO-12-665 Multiple Employer Plans 

Appendix IV: Comments from the Pension 

Benefit Guaranty Corporation
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 49 GAO-12-665 Multiple Employer Plans 

Charles Jeszeck, (202) 512-7215 or jeszeckc@gao.gov

In addition to the contact named above, Patrick DiBattista, Assistant 

Director; Chuck Ford; Ted Leslie; David Reed; Craig Winslow; and Frank 

Todisco made key contributions to this report. Also contributing to this 

report were Amy Anderson, David Chrisinger, Mimi Nguyen, Jodi 

Munson-Rodriguez, Roger Thomas, and Paul Wright.

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(131075)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (www.gao.gov). Each weekday afternoon, 

GAO posts on its website newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, 

go to www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube. 

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. 

Visit GAO on the web at www.gao.gov. 

Contact:

Website: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Please Print on Recycled Paper.