What is a MEP?

‘MEP’ stands for multiple employer plan.  MEPs are defined in IRC 413(c) and are retirement plans that cover unrelated employers.  A MEP can be either a 401(k) plan or a defined benefit plan.  Examples of MEPs include the following scenarios:

  • Two large unrelated publicly traded companies decided to merge their 401(k) plans into a single 401(k) plan.  The combined plan would be a MEP.
  • Two unrelated companies, Company A and Company B, decide to form a joint venture, JV, where each owns 50% of JV.  For 401(k) purposes, JV is unrelated to both Company A and Company B because neither has enough ownership in JV for JV to be part of either controlled group.  If JV participates in Company A’s 401(k) plan, Company A’s 401(k) plan becomes a MEP because it covers unrelated employers.
  • Company X and Company Y are part of a brother-sister controlled group, and they participate in the XY 401(k) Plan.  The ownership of Company X changes and takes it out of the same controlled group, but both companies continue to participate in the XY 401(k) plan.  XY 401(k) plan is a MEP.
  • Some groups market MEPs to unrelated employers to reduce costs.
  • PEOs

It is important to distinguish a MEP from a plan that covers related employers.  If Acme Corporation has thirty-five wholly owned subsidiaries, and each of the thirty-five subsidiaries adopts the Acme Corporation 401(k) plan, the Acme Corporation 401(k) plan is still considered a single employer plan even though it has many companies who have adopted the plan because all of the companies who have adopted the plan are related.

It is also important to distinguish a MEP from a multiemployer plan.  Though the names are very similar, a MEP is very different than a multiemployer plan.  A multiemployer plan is usually sponsored by a union and one or more employers.  The employers are usually in the same industry.  Multiemployer plans are also called Taft Hartley plans.