Pooled Employer Plans (PEPs): Opportunities and Fiduciary Implications

Retirement plan options have evolved significantly in recent years, giving employers more ways to provide competitive benefits while reducing administrative burdens. One of the most impactful innovations introduced under the SECURE Act of 2019 is the Pooled Employer Plan (PEP).

For small and mid-sized businesses, Pooled Employer Plans (PEPs) represent an opportunity to offer retirement benefits comparable to larger organizations without carrying the same level of fiduciary risk or administrative responsibility.

At AS Wealth Management Planning, we work closely with employers to understand whether a PEP is the right solution for their business, ensuring both compliance and long-term plan success.

What Is a Pooled Employer Plan (PEP)?

A Pooled Employer Plan (PEP) is a retirement plan that allows multiple unrelated employers to participate in a single, pooled plan structure. Unlike Multiple Employer Plans (MEPs), which required a “common nexus” (such as being in the same industry), PEPs are open to any employer.

Each PEP is managed by a Pooled Plan Provider (PPP), who assumes primary fiduciary and administrative responsibilities. This arrangement allows employers—especially smaller ones—to benefit from economies of scale, simplified oversight, and reduced liability.

Opportunities for Employers

Joining a Pooled Employer Plan (PEP) offers several advantages for businesses of all sizes, but especially for small to mid-sized employers:

1. Cost Savings Through Scale
   By pooling together, employers can leverage greater bargaining power with investment providers and recordkeepers. This often translates into lower fees and better plan options for employees.

2. Reduced Administrative Burden
   The Pooled Plan Provider (PPP) handles much of the day-to-day plan administration, including filings, compliance testing, and participant disclosures.

3. Fiduciary Risk Transfer
   Employers share fiduciary responsibilities with the PPP, significantly reducing individual liability exposure.

4. Access to High-Quality Plans
   Smaller businesses can offer retirement plans with investment menus and features that are often only available to larger organizations.

5. Enhanced Recruitment and Retention
   Providing a robust 401(k) option through a PEP helps small businesses compete for top talent in a competitive labor market.

At AS Wealth Management Planning, we help employers evaluate the cost-benefit tradeoffs of joining a PEP and determine if it aligns with their workforce strategy.

Fiduciary Implications of Joining a PEP

While Pooled Employer Plans (PEPs) reduce fiduciary burdens, they do not eliminate them entirely. Employers must still act prudently when selecting and monitoring the PEP provider.

Key fiduciary considerations include:

1. Duty to Select a Qualified Pooled Plan Provider (PPP)
   Employers are responsible for vetting the PPP to ensure they are capable of managing fiduciary duties and plan compliance.

2. Ongoing Monitoring
   Employers must periodically review the PPP’s performance, fees, and service quality. This oversight is essential to fulfilling fiduciary duties under ERISA.

3. Fee Transparency
   Employers remain responsible for understanding and ensuring plan fees are reasonable for participants.

4. Employee Communication
   Even under a PEP, employers must provide employees with accurate information about the plan and ensure they understand their options.

By working with a partner like AS Wealth Management Planning, employers can confidently meet these fiduciary responsibilities while enjoying the advantages of a pooled plan structure.

IRS and DOL Oversight

Both the IRS and the Department of Labor (DOL) oversee PEP compliance. Plan sponsors should be aware of regulatory expectations, including:

• Ensuring contributions are remitted timely.

• Monitoring investment performance and diversification.

• Filing necessary disclosures (handled primarily by the PPP but still requiring employer oversight).

Recent regulatory updates have reinforced that while PEPs simplify compliance, employers cannot adopt a “set it and forget it” approach. Fiduciary oversight—though reduced—remains a core obligation.

Is a PEP Right for Your Business?

Not every employer will benefit equally from joining a Pooled Employer Plan (PEP). Here are some factors to consider:

• Company Size: Smaller employers with limited HR resources often see the greatest value.

• Cost Structure: Compare projected savings against your current 401(k) plan.

• Workforce Needs: Consider whether your employees would benefit from enhanced investment options or simplified access.

• Fiduciary Comfort: Employers looking to reduce liability exposure may find PEPs particularly attractive.

At AS Wealth Management Planning, we guide employers through a structured analysis to determine whether a PEP is the most beneficial path—or whether a traditional standalone 401(k) remains the best option.

Best Practices for Employers Joining a PEP

1. Conduct Thorough Due Diligence – Review the PPP’s qualifications, history, and fiduciary capabilities.

2. Understand the Fee Structure – Make sure cost savings truly benefit both employer and employees.

3. Engage Employees – Provide clear communication about how the PEP works and its advantages.

4. Regularly Review the Plan – Even under a pooled structure, monitor investment performance and service quality.

5. Partner With an Advisor – Work with experts like AS Wealth Management Planning to ensure ongoing compliance and optimization.

How AS Wealth Management Planning Supports Employers

At AS Wealth Management Planning, we provide:

• PEP Evaluation Services – Helping employers analyze whether joining a PEP makes financial and fiduciary sense.

• Fiduciary Support – Guiding employers in meeting their responsibilities when selecting and monitoring a PPP.

• Plan Design Expertise – Tailoring solutions to ensure retirement benefits align with workforce goals.

• Employee Education – Ensuring participants understand and maximize their retirement savings opportunities.

Our mission is to help employers simplify plan management, reduce risk, and deliver strong retirement outcomes for their employees.

Final Thoughts

Pooled Employer Plans (PEPs) represent a major step forward in expanding access to quality retirement benefits. For many employers, they offer cost savings, reduced administrative complexity, and lower fiduciary risk—all while enhancing employee financial wellness.

However, employers must still exercise prudence in selecting and monitoring their PEP provider. With the right guidance, joining a PEP can be a powerful strategy for delivering a competitive, compliant retirement plan.

At AS Wealth Management Planning, we’re here to help you evaluate your options, understand the fiduciary implications, and implement the best solution for your workforce.