Navigating the complexities of retirement plan administration can be challenging, particularly when balancing compliance, costs, and employee satisfaction. For 401(k) sponsors striving to offer robust retirement benefits while minimizing administrative burdens, Pooled Employer Plans (PEPs) offer a compelling solution.
What is a Pooled Employer Plan (PEP)?
A Pooled Employer Plan (PEP) is a retirement savings plan that allows multiple unrelated employers to join a single, shared 401(k) plan. Unlike traditional Multiple Employer Plans (MEPs), PEPs remove the “commonality” requirement, meaning employers from different industries or regions can participate without needing a specific linkage. By pooling resources, participating employers can benefit from simplified administration, reduced costs, and enhanced compliance support.
PEPs unveiled: their origins and purpose
PEPs were introduced as part of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law in December 2019. The act aimed to address key challenges in the retirement landscape, particularly the lack of access to employer-sponsored retirement plans for millions of Americans. Small- and mid-sized businesses often struggled with the high costs and administrative burdens associated with offering standalone 401(k) plans, which created significant barriers to entry.
PEPs officially became available on January 1, 2021. The intention was to create a cost-effective, streamlined solution that would encourage more employers—particularly smaller businesses—to provide retirement plans to their employees. By simplifying compliance and lowering administrative overhead, PEPs strive to increase access to high-quality retirement savings options nationwide.
Who is eligible to participate in a PEP?
One of the most attractive features of a PEP is its broad eligibility criteria. Any employer, regardless of size, industry, or geographic location, can join a PEP, provided they meet the requirements set forth by the specific plan and its Pooled Plan Provider. This flexibility makes PEPs particularly appealing to small and mid-size employers, nonprofits and growing companies.
The Pooled Plan Provider ensures compliance and fiduciary oversight, allowing participating employers to reduce their liability and focus on their core operations.
Key advantages of adopting a PEP
The benefits of Pooled Employer Plans extend beyond cost savings. Below are the primary advantages that make PEPs a valuable consideration for 401(k) sponsors.
1. Simplified plan administration and compliance support
Participating in a PEP transfers much of the administrative workload and compliance oversight to the Pooled Plan Provider. Tasks like maintaining compliance with IRS and Department of Labor (DOL) regulations, handling annual filings, and managing audits are managed by the PPP. This allows employers to focus on supporting their employees without being bogged down by regulatory complexities while reducing the likelihood of penalties or errors.
2. Cost efficiency through shared resources
By pooling resources with other employers, PEP participants can achieve economies of scale. Administrative costs, investment expenses, and other fees are distributed across all participating employers, often resulting in significant cost savings compared to standalone 401(k) plans.
3. Attractive retirement benefits for employees
Employees benefit from access to retirement plans with competitive investment options and effective plan management. The streamlined structure of PEPs ensures higher-quality services, which can be an effective tool for attracting and retaining top talent.
4. Accessibility and scalability for smaller employers and growing businesses
PEPs are particularly beneficial for small and mid-sized growing businesses that may not have the infrastructure to design and administer their own retirement plans. By participating in a PEP, these employers can offer a scalable solution that accommodates an increasing workforce without requiring significant changes to plan design or administration.
Why PEPs are worth considering?
For 401(k) sponsors navigating an increasingly complex retirement plan landscape, Pooled Employer Plans present a streamlined and compliant solution. By participating in a PEP, employers can focus on what they do best—managing their businesses—while ensuring their employees have access to high-quality retirement benefits. With PEPs, you’re not just simplifying operations; you’re investing in your workforce’s financial security and future.
Next steps for 401(k) sponsors
If you’re considering whether a Pooled Employer Plan is the right fit for your organization, start by evaluating your current plan’s performance, costs, and compliance status. Then, consult with a qualified Risk Strategies Retirement Plan Services Provider to discuss how a PEP could align with your goals and workforce needs.
Risk Strategies Retirement Plan Services specializes in delivering tailored corporate retirement plan solutions that help businesses reduce fiduciary risk, streamline plan administration, and enhance employee retirement outcomes. Whether you're a small business looking for your first plan or a growing company seeking a more cost-effective and compliant strategy, our team brings deep expertise, transparent pricing, and hands-on support every step of the way.
About the author
Michael Waters, Senior Managing Director
Michael Waters serves as Senior Managing Director in the Financial & Wealth Services division of Risk Strategies. He brings more than 35 years of financial services experience to his clients with a focus on employee benefits, wealth management, and retirement plan services.
Michael started his career with Profit and Pension Planners Inc., a retirement plan consulting firm in 1985 and became a partner in 1989. In 2003, Michael was one of the founding members of TSG Financial LLC, a full-service employee benefits and Financial Services consultant and broker. TSG Financial was acquired by Risk Strategies in 2016.
Michael strives to provide highly-responsive, personalized strategies to sophisticated clients who desire holistic financial counsel. He believes in developing long-term partnerships with his clients who benefit from competitive, transparent pricing, appropriate products, and personalized guidance. Michael works closely with the Private Equity and Employee Benefits teams to deliver retirement plan solutions which complement the overall corporate programs at Risk Strategies.
Michael earned a Bachelor of Arts degree from Binghamton University. He is a chartered life underwriter, CLU, and Chartered Financial Consultant.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth. Osaic Form CRS. This communication is strictly intended for individuals residing in the states of: AZ, CA, CO, CT, DE, FL, GA, IL, IN, IA, KS, LA, MD, MA, MN, MT, NV, NJ, NY, NC, OH, OR, PA, SC, TN, TX, UT, VA, WY, DC. No offers may be made or accepted from any resident outside the specific states referenced.
