For those business owners or HR directors who are frustrated by the increasing responsibilities that come along with sponsoring and administering a 401(k) program – all those time consuming rules and regulations -- a pooled employer plan (PEP) may be an attractive alternative. This is an option to consider when looking to shift the fiduciary responsibilities, plan management and associated administrative functions that come along with a plan, to your provider. Is a Pooled Employer Plan the right choice for your organization? When does it make sense to pool or not to pool your organization’s retirement plan? We will review the benefits of a PEP below.

A Pooled Employer Plan (PEP) is a type of retirement plan designed to allow multiple unrelated employers to participate in a single, professionally managed retirement plan. PEPs were introduced under the SECURE Act of 2019 to expand access to retirement savings plans, especially for small businesses that may not have the resources to sponsor their own plans. It may not be right for everyone, but for some there are significant benefits. Here’s an overview:

Key features of PEPs

• The Pooled Plan Provider (PPP):
  • A PPP serves as the fiduciary and administrator of the plan. They are responsible for managing the plan, ensuring compliance, and reducing the administrative burden on participating employers.
• Multiple Employers:
  • Unrelated employers can join the same plan, benefiting from economies of scale and streamlined operations. Unlike traditional Multiple Employer Plans (MEPs), PEPs don’t require employers to have a common nexus (e.g., industry affiliation).
• Reduced fiduciary liability for employers:
  • Employers retain some fiduciary responsibilities (e.g., selecting and monitoring the PPP), but much of the liability is shifted to the PPP.
• Cost efficiency:
  • By pooling resources, PEPs can reduce administrative costs and provide access to lower-cost investment options compared to standalone plans.
• Simplified plan administration:
  • The PPP handles most administrative tasks, such as filing Form 5500, maintaining plan documents, and compliance.

Benefits of PEPs

• Accessibility: Easier for small businesses to offer retirement benefits to employees.
• Reduced costs: Shared administrative, investment costs and possible reduction of audit costs.
• Professional management: Expertise from the PPP helps ensures compliance and efficient plan management.
• Flexibility: Employers retain the ability to set certain plan terms, like matching contributions.
• Efficiency: Less time spent on non-core functions, more time on sales and profit moving functions

Considerations for employers:

• Selection of a reputable PPP: The quality of the PPP is critical, as they assume most fiduciary responsibilities.
• Employer-level fiduciary duties: Employers still need to oversee the selection and monitoring of the PPP.
• Potential customization limits: PEPs may not offer the same level of customization as standalone plans.
• Fees: Understand the fee structure of the PEP and how it compares to other options.

PEPs may be particularly attractive for:

• Small and medium-sized businesses with or without a current retirement plan.
• Employers seeking to reduce administrative burden or plans with high associated audit costs.
• Companies interested in leveraging economies of scale for their employees’ retirement plans.
• Companies trying to eliminate non-core responsibilities.

The Dimino-Seewald Group at RBC Wealth Management focuses on helping their clients create, oversee, and assist with a plan sponsors’ responsibilities in maintaining a workplace retirement program. Their retirement plan solutions are set with the goal of higher participation rates, higher contribution levels and a well-thought-out financial wellness program for the clients and participants they serve. They are the trusted consultants who help bring order, clarity, and customized solutions to your organization’s retirement plan program while aiming to keep overall plan costs under control. The team brings over 25 years of retirement plan experience, credentialed industry professionals who act within the best interests of the plan sponsor and their participants. They have been nationally recognized for their excellence servicing retirement plans of all sizes and the retirement plan industry. Please contact them directly at 732-576-4652 or the diminoseewaldgroup@rbc.com for a complimentary review of your organization’s retirement plan.