Association Retirement Plan (ARP)

What Is an Association Retirement Plan (ARP)?

An association retirement plan (ARP) is a type of “closed” multiple employer plan (MEP) that makes it easier for small businesses and self-employed working owners to offer a retirement savings plan, such as a 401(k), to their employees by allowing companies to band together based on either geographic location or type of trade or industry.

ARPs can reduce administrative costs and complexity while enhancing small employers’ ability to negotiate through economies of scale. They can also minimize fiduciary responsibility, which can be a stumbling block for small companies with limited resources.

Key Takeaways

  • An Association Retirement Plan (ARP) allows employees of a small business to band together to form a retirement savings plan.
  • ARPs allow employers in different industries but the same geographic area—as well as employers in the same industry regardless of the geographic area—to sponsor such a plan.
  • Sponsors can include local organizations, such as a chamber of commerce, as well as professional employer organizations (PEOs).

How an Association Retirement Plan (ARP) Works

The U.S. Department of Labor (DOL) created ARPs as part of a new rule, effective Sept. 30, 2019, designed to help strengthen retirement security for American workers by expanding the definition of “employer” under ERISA guidelines. The creation of ARPs is, in part, a response to a 2018 study by the U.S. Bureau of Labor Statistics (BLS) that found approximately 38 million private-sector workers in the U.S. did not have access to an employer-provided retirement savings plan.

ARPs allow unrelated employers and self-employed working owners to connect to a group of employers in a city, county, state, or metropolitan area regardless of the industry as long as the association, such as a chamber of commerce, shares a connection or nexus to member employers in addition to the retirement savings plan. ARPs may also be sponsored through a professional employer organization (PEO), which is a third-party human resources provider that handles accounting, payroll, taxes, and other administrative duties for member companies. Self-employed working owners are not permitted to join an ARP sponsored by a PEO.

An ARP makes it easier for small businesses to offer employer-sponsored retirement plans to their workers.

Sponsors of Association Retirement Plans

The sponsor (administrator) of an ARP can be a bona fide association of employers or self-employed working owners or a human resources company known as a PEO. Financial institutions and service providers such as banks do not qualify as sponsors.

  • Bona Fide Association. A local chamber of commerce, trade or industry group, or other organization that meets DOL and Internal Revenue Service (IRS) criteria, including a nexus or connection other than the group’s retirement savings plan. It can sponsor an ARP for members.
  • Professional Employer Organization (PEO). A human resources company, a PEO provides significant administrative and accounting services to client employers, meets DOL and IRS criteria, and can also sponsor an ARP for those clients.

38 Million

The number of private-sector workers in the U.S. who lack access to an employer-provided retirement savings plan.

Benefits of Association Retirement Plans

The new DOL rule expands and enhances small business access to retirement savings plans through ARPs to include the following benefits:

  • Expanded meaning of “employer” under ERISA to include employers in the same geographic area, regardless of industry
  • Expanded meaning of “employer” under ERISA to include employers in the same industry, regardless of the geographic area
  • Lowered costs for employers due to membership in a single-plan MEP
  • Decreased regulatory burdens and fiduciary liability by having the plan sponsor handle those responsibilities
  • Enabling members to negotiate using economies of scale for better benefits and access to more providers.

Article Sources

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  1. Federal Register. "Definition of “Employer” Under Section 3(5) of ERISA-Association Retirement Plans and Other Multiple-Employer Plans." Accessed June 13, 2021.

  2. U.S. Department of Labor. "FACT SHEET: Final Rule on Association Retirement Plans (ARPs)." Accessed June 13, 2021.

  3. U.S. Chamber of Commerce. "Association Retirement Plans:

    Regulatory Overview and Next Steps," Page 6. Accessed June 13, 2021.

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