What’s the difference between multiemployer and multiple employer plans?

[Updated article; original publish date August 24, 2023]

Why union workers need a different kind of retirement plan

Union workers often work for different employers at different times throughout their careers. This can make it hard to qualify for standard employer-based retirement benefits, where eligibility and vesting are tied to a single company.

Multiemployer retirement plans are designed to solve this issue. Union workers can generally take their service and benefits with them when changing jobs. This helps union workers continue saving without gaps and stay on track for retirement.

Unions play a key role in helping members save for retirement by:

• Negotiating employer contributions and plan features—Unions use their collective bargaining power to secure better employer contributions, clearer plan rules, and stronger protection against benefit cuts than most individuals could get on their own.
• Providing education and support—Unions help members understand how their retirement plan works, offer resources and webinars on retirement planning, and provide guidance so members can make informed decisions and get the most from their retirement benefits.

Here’s a simple example:

Joe’s a member of I.U.P.A.T. Local Union 123, which sponsors a multiemployer 401(k). His current employer participates in the plan. After two years of service, Joe takes a new painting job with a different company. His two years of service follow him, and his retirement savings can continue without interruption. That portability is a core advantage for union workers.

Taft‑Hartley plan rules and requirements

In a typical Taft-Hartley multiemployer plan, a joint board of trustees serves as the plan sponsor and named fiduciary, with equal representation from the union and participating employers (management and labor). Under the Employee Retirement Income Security Act of 1974 (ERISA), the board must:

• Act solely in the best interests of participants and beneficiaries
• Select and monitor the plan’s investments
• Hire and oversee service providers, including recordkeepers, third-party administrators (TPAs), and investment managers

These plans follow many of the same IRS rules as a single-employer plan, including:

• Eligibility and vesting (usually immediate for both)
• Annual Form 5500 filing
• Nondiscrimination testing
• Required minimum distributions

Taft-Hartley plans also have some unique requirements and complexities. That’s why unions and contributing employers often work with financial professionals, TPAs, and service providers who specialize in Taft-Hartley and multiemployer plans. 

How a multiple employer plan (MEP) is different

If multiemployer plans are designed for union workers, where do MEPs come in? A MEP is a retirement plan maintained by two or more employers—often small or midsize businesses—that usually share some common interest, such as being in the same industry, association, or professional group.

For these employers, MEPs can be a cost-effective way to offer a retirement plan with:

• Shared administration
• Potentially lower costs than an individual plan
• Access to features and support that might be harder to obtain individually

Unlike multiemployer plans, however, MEPs generally don’t serve union workers under collective bargaining agreements, and portability between MEP employers is often more limited.

What’s in a name?

The retirement industry has its own language. While the words multiemployer and multiple employer sound almost identical, they describe very different plan structures, with different rules, governance, and goals. Knowing the differences can help you choose the right plan type. And you don’t have to figure it out alone. Working with financial professionals and service providers who truly understand Taft-Hartley multiemployer plans and MEPs can help you design a retirement program that works.

FAQs

What is a multiemployer retirement plan?

A multiemployer retirement plan, often called a Taft-Hartley plan, is a union-sponsored plan that allows multiple, typically unrelated employers in the same industry to contribute to one retirement program under a collective bargaining agreement. It’s designed so union workers can carry their service and benefits with them when they change employers within the same plan.

What is a multiple employer plan (MEP)?

A multiple employer plan (MEP) is a retirement plan maintained by two or more employers, often small or midsize businesses, that usually share a common interest, such as industry or association membership. MEPs let employers pool resources to share administration, potentially lower costs, and access plan features that might be harder or more expensive to obtain individually.

How are multiemployer plans funded?

Multiemployer plans are funded by contributions from multiple employers that participate under a collective bargaining agreement with a union. Each employer makes contributions, often based on hours worked or wages, to the same plan that covers union workers. The jointly managed board of trustees oversees investments and service providers, seeking economies of scale and centralized administration to help manage costs and support the plan’s long-term benefit promises. Some multiemployer plans also allow for member contributions, tracked by individual employers and consolidated by a TPA or the union fund office.

Who regulates multiemployer plans?

Taft-Hartley multiemployer plans are governed by ERISA, which imposes fiduciary obligations on the joint board of trustees. Under ERISA, trustees must act in participants’ best interests, select and monitor investments, and oversee service providers as the plan’s named fiduciaries.