A Multiple Employer Plan, or MEP, is a single retirement plan that two or more unrelated small businesses share instead of each running its own 401(k). For a small business, joining a MEP plan means splitting administrative costs with other employers, handing most of the compliance workload to a central administrator, and giving your employees access to investment options a standalone small plan usually can’t match. Federal law changes in the SECURE Act and SECURE 2.0 opened these arrangements to businesses that have no trade association or franchise connection, and added tax credits that can wipe out most of the first-year cost.
How a MEP Actually Works
Every MEP has a lead sponsor at the center. That sponsor, often a professional employer organization or a trade association, maintains the plan document, selects investments, and runs day-to-day operations. When your business joins, you sign onto the sponsor’s existing plan rather than creating your own. One plan document covers everyone.
The practical result is consolidated paperwork. The lead sponsor files one Form 5500 annual return for the whole plan, with a Schedule MEP listing every participating employer by name and EIN along with each one’s share of contributions and account balances.1U.S. Department of Labor. 2025 Schedule MEP (Form 5500) – Multiple-Employer Retirement Plan Information You still run your own payroll and withhold employee contributions, but for vesting, participation rules, and minimum funding standards, the plan is treated as one entity.2Office of the Law Revision Counsel. 29 USC 1060 – Multiple Employer Plans and Other Special Rules
Closed MEPs and Pooled Employer Plans
MEPs historically required participating employers to share some connection: membership in the same trade group, franchise system, or industry association. These “closed” MEPs still exist and work well if your business already belongs to such a group.
The SECURE Act of 2019 added a second option that matters more for most small businesses: the Pooled Employer Plan, or PEP. A PEP lets completely unrelated companies join the same retirement plan regardless of industry, geography, or any pre-existing relationship.3Federal Register. Pooled Employer Plans: Big Plans for Small Businesses If you have no trade association to lean on, this is the version you’re most likely to encounter.
Every PEP must be run by a Pooled Plan Provider, or PPP. The PPP acts as the named fiduciary and plan administrator and is responsible for keeping the plan compliant with both tax and ERISA rules. It must register with the Department of Labor and the Treasury before operating.3Federal Register. Pooled Employer Plans: Big Plans for Small Businesses In practice, most PPPs are bundled recordkeepers or third-party administrators that handle investment selection, nondiscrimination testing, and participant disclosures.
One historical worry about joining a multi-employer arrangement is worth putting to rest. The old “one-bad-apple” rule, which could disqualify an entire plan because one participating employer messed up, no longer applies to PEPs and certain MEPs. Under IRC Section 413(e), the plan administrator can wall off a noncompliant employer, stop accepting its contributions, and preserve the tax-qualified status of everyone else.4Office of the Law Revision Counsel. 26 USC 413 – Collectively Bargained Plans, Etc
What a MEP Costs a Small Business
Two SECURE 2.0 tax credits do most of the work of offsetting cost for small employers.
The first is the startup cost credit, available for three years. Employers with 50 or fewer employees earning at least $5,000 can claim 100% of eligible startup costs up to the greater of $500 or $250 per eligible non-highly-compensated employee, capped at $5,000. Employers with 51 to 100 qualifying employees claim 50% under the same formula.5Internal Revenue Service. Retirement Plans Startup Costs Tax Credit
The second is a credit for employer contributions. For employers with 50 or fewer employees, it covers up to $1,000 per employee for the first two years, then phases down over the next three years at 75%, 50%, and 25%. For a business at that size, employer matching contributions are effectively free for the first two years. Taken together, the two credits can eliminate most of the out-of-pocket expense of joining a MEP or PEP.
What Still Falls on You as the Employer
Joining a PEP does not transfer every fiduciary responsibility. Two duties stay with each participating employer under ERISA. First, you remain responsible for selecting and monitoring the Pooled Plan Provider and any other named fiduciary. The choice of who runs the plan carries an ongoing duty to confirm they continue doing it competently. Second, you keep responsibility for the investment and management of plan assets attributable to your employees, unless the PPP has delegated investment decisions to a qualified investment fiduciary.3Federal Register. Pooled Employer Plans: Big Plans for Small Businesses
In practice, you can’t sign the adoption agreement and forget the plan exists. You need to review periodically whether the PPP is meeting its obligations, check that fees stay reasonable, and confirm investment options fit your workforce. Most small employers meet this standard with an annual review, but the duty is continuous. The Department of Labor has indicated it may issue a formal safe harbor for small employers, but as of mid-2025 that safe harbor had not been finalized.3Federal Register. Pooled Employer Plans: Big Plans for Small Businesses
The other duty you keep is depositing employee contributions on time. Federal rules require contributions to reach the plan trust as soon as reasonably possible after each payroll. The 15th business day of the following month is the outer limit, not a target. If your payroll system can transfer deferrals in five business days, five business days is your deadline.6U.S. Department of Labor. ERISA Fiduciary Advisor – What Are the Fiduciary Responsibilities Regarding Employee Contributions Plans with fewer than 100 participants get a 7-business-day safe harbor from the DOL.7Internal Revenue Service. 401(k) Plan Fix-It Guide – You Havent Timely Deposited Employee Elective Deferrals Late deposits trigger correction requirements and potential penalties, so test the payroll integration carefully before going live.
Auto-Enrollment Rules That May Apply
Any 401(k) plan established after December 29, 2022, including a new MEP or PEP, must include automatic enrollment for plan years beginning after December 31, 2024. The default contribution rate must be at least 3% and no more than 10% of compensation, and it must step up by one percentage point each year until it reaches at least 10%, capped at 15%.8Federal Register. Automatic Enrollment Requirements Under Section 414A Employees can opt out or change their rate, but the plan must start them at the default.
Several exemptions apply. Plans established before December 29, 2022, are grandfathered. So are businesses that have existed fewer than three years, businesses with 10 or fewer employees, SIMPLE 401(k) plans, and government or church plans.8Federal Register. Automatic Enrollment Requirements Under Section 414A If you join an existing PEP that was created before the cutoff, the mandate may not reach that plan, though many PEPs include auto-enrollment as a plan design feature anyway.
What You’ll Need to Enroll
Before signing on, the plan administrator will ask for your Employer Identification Number, legal entity name, and headquarters address. You’ll also submit census data for each eligible employee: name, date of birth, hire date, and current compensation. If you’re moving an existing retirement plan into the MEP, you’ll provide data on existing account balances and participant counts.
The core document is the adoption agreement, sometimes called a joinder agreement. This is the contract that links your company to the plan. In it, you choose the plan features that apply to your workforce: default deferral rate, matching formula (for example, dollar-for-dollar on the first 3% of pay), eligibility requirements, and vesting schedule. The lead sponsor or PPP usually provides these forms through an online portal. Your selections govern your employees only. Other employers in the same MEP may have picked different match rates or eligibility rules.
Once the agreement is signed and your data is submitted, the plan administrator sets up your company in the recordkeeping system. The process typically takes a few weeks, longer if you’re transferring assets.
Two tasks run in parallel after approval. You must distribute a Summary Plan Description to every eligible employee. ERISA requires this document, and it explains plan rules, benefits, and participant rights in plain language.9U.S. Department of Labor. Plan Information The administrator usually drafts it; getting it into employees’ hands is on you. Your payroll system also needs to connect with the plan’s recordkeeper so deferrals flow from each paycheck into the plan trust.
If you’re migrating from an existing plan, employees may face a blackout window where they can’t access accounts, change investments, or take distributions while assets transfer. ERISA requires at least 30 days’ advance written notice to affected participants before a blackout begins, with a maximum of 60 days’ advance notice.10eCFR. 29 CFR 2520.101-3 – Notice of Blackout Periods Under Individual Account Plans Narrow exceptions apply for mergers, acquisitions, and unforeseeable events, in which case notice must go out as soon as reasonably possible.
Getting Out of a MEP Later
Leaving is harder than joining. When an employer withdraws, the plan assets attributable to that employer’s participants have to be spun off into a separate plan or rolled over into a new arrangement. The spinoff is reported to the IRS on Form 5310-A.11Internal Revenue Service. About Form 5310-A, Notice of Plan Merger or Consolidation, Spinoff, or Transfer of Plan Assets or Liabilities
The mechanics can be messy. Account balances have to map accurately from one recordkeeper to another, vesting schedules have to carry over, and outstanding plan loans have to be dealt with. Setting up a standalone 401(k) in place of the MEP can take several months, and participants may face a blackout window during the transition. Before you sign the adoption agreement, read the exit terms. Some plans charge a separation fee or require a minimum participation period.