Pooled Employer Plans (PEPs)

What are Pooled Employer Plans?

Established as part of 2019’s SECURE Act as a way to help more people prepare for retirement, and as a way to make it easier for business owners to offer their employees 401(k) plans, Pooled Employer Plans, or PEPs, enable unrelated employers to participate in a single, shared defined contribution plan. Pooled Employer Plans represent the first significant new retirement plan related legislation in over a decade.    

Who can participate in a Pooled Employer Plan?

If you’re the owner of a small, medium, or large-sized business who is interested in offering your employees a 401(k) plan, or if you already have a plan, and would like more simplicity and reduced liability, then adopting a PEP could be ideal for you. PEPs allow two or more unrelated employers, even employers from entirely different business sectors and industries who share no common interests, to participate in a 401k plan offering more commonly only available to larger plans.

What are the advantages of participating in a Pooled Employer Plan?

The PEP is attractive to companies who are interested in simplified administration, reduced liability, and the possibility of reducing the costs associated with running a 401(k) plan. When companies choose to participate in a PEP, they are given the unique ability to offload many of their administrative duties, as well as most of their fiduciary liability to the sponsor of the PEP.  In addition, the PEP offers the potential for reducing total plan fees as a result of the economies of scale that can be achieved in a PEP.

When will Pooled Employer Plans become available?

Employers can start adopting the PEP in January of 2021.