Key Considerations for Employers Considering Pooled Employer Retirement Plans

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) established a new structure whereby a group of unrelated employers could participate in a single defined contribution plan called Pooled Employer Plans (PEPs) as of January 1, 2021. 

How PEPs are Managed

Pooled Employer Plans (PEPs) must be administered by a Pooled Plan Provider (PPP), which acts as the plan sponsor, handling all fiduciary, administrative, and investment responsibilities. PPPs must be registered with the Department of Labor (DOL) before beginning operations.

Because of the highly specialized requirements for administering a PEP, the PPP role is more likely to be filled by registered investment advisors (RIAs), third-party administrators (TPAs), record keepers, and other financial services entities. 

The primary purpose of a PEP is to remove as many of the administrative and fiduciary duties as possible from the employer.  To that end, it is anticipated that most PPPs will outsource the fiduciary duties of a plan administrator to a TPA and investment decision fiduciary duty to an RIA. The PPP will also be responsible for the traditional roles of custodian and record keeper.

Each employer that participates in a PEP will fill the role of plan administrator to that employer’s plan assets and participants. Depending on the specific plan, an employer may hire a PPP only, which then hires other providers, or may elect to hire each provider independently. The employer will always retain the responsibility for funding the PEP with employer and employee contributions as well as provide plan participant information to the PPP and other service providers.

PEP Benefits for Employers

While the benefits of PEPs for small employers are fairly apparent, large employers are also weighing the benefits of outsourcing their retirement plan administration obligations and the corresponding liability to a PPP. Shifting the legal obligations of a plan sponsor adds a substantial layer of fiduciary protection that was unavailable until now.

In general, most employers may outsource the following duties by participating in a PEP:

  • Selecting and monitoring investments
  • Form 5500 filings
  • Plan document/restatement
  • Annual plan audit
  • Providing participant notices
  • Administering participant loans
  • Handling distributions and rollovers
  • Conducting annual testing
  • Managing hardship distributions

Since plans with a larger pool of assets typically enjoy better pricing for plan services and access to a wider range of investment products, joining a PEP may provide cost savings as well. 

While PEPs may not be a logical fit for every employer, employers considering joining a PEP should discuss the benefits and limitations with their legal benefits counsel.

HBL helps our clients stay on top of the legislative and regulatory changes that apply to their employee benefit plans, and our team ensures that plans and processes are updated to stay in compliance. To learn more, call our team today at 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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