What is a MEP?

A MEP is a “Multiple Employer Plan,” which is an employee benefit plan that provides benefits for two or more employers that are not part of the same “controlled group” of employers. The term is used in both the Income Tax Code and under the Employee Retirement Income Security Act of 1974 (“ERISA”) but may not have the same meaning in each context.


A MEP is to be distinguished from two other types of plans:


  1. A Single Employer Plan–this could be either:

  2. a plan that covers employees of only one employer; or

  3. a plan that covers only employees of multiple employers that are all in the same controlled group of corporations, i.e., a group of “related employers” [See –Addressing the Risks of Related Employer Status for Benefit Plan Purposes]; or

2. A Multi-employer plan: a plan that is sponsored by a collective bargaining unit and in which two or more unrelated employers participate.


A MEP can be created intentionally (for example where two unrelated employers adopt the same plan) or can be the unintentional result of a corporate or other ownership change (e.g., the death of a controlling shareholder). For example, if a parent corporation sells a subsidiary that participates in its 401(k) plan to an unrelated entity and does not amend the plan to exclude the subsidiaries’ employees at closing, the 401(k) plan will become a MEP upon the sale.


For tax purposes, Code Section 413(c) applies special rules to qualified retirement plans that are MEPs. In general, the tax qualification requirements apply to each employer in a MEP as if they sponsor a separate plan, but special rules do apply for purposes of crediting service (including for eligibility and vesting), for satisfying the coverage, discrimination and top-heavy rules, for funding purposes, for deductions and for determining if there has been a severance from employment. These special rules need to be reflected in the qualified plan document and failure to either include appropriate language in the document or to operate the plan in a manner that is consistent with the MEP requirements can be a disqualifying defect which may need to be corrected to maintain the plan’s tax qualified status. [See – 401(k) Retirement Plan Disqualification]


Under the ERISA rules, special rules also apply to MEPS, depending on whether or not they are a “closed” MEPor an “open” MEP. [See –Multiple Employer Retirement Plans-Saving the Barrel from the One Bad Apple & Multiple Employer Retirement Plans-The DOL Opens the Door]


MEP status also matters for determining if a health or welfare plan is a Multiple Employer Welfare Arrangement or “MEWA.”[See–What is a MEWA?]


Please contact our Firm if you would like to discuss any of the foregoing information in greater detail. We would welcome the opportunity to consult with you.


© Boutwell Fay LLP 2019, All Rights Reserved.This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us.The information contained in this article is effective as of August 30, 2019.



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