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For employers, offering a competitive retirement benefit is important. Managing the administration, compliance requirements, and fiduciary responsibilities that come with that benefit can be more complicated.

A Pooled Employer Plan, or PEP, is one option designed to simplify some of those responsibilities. A PEP allows multiple unrelated businesses to participate in a single employer-sponsored 401(k) retirement plan.

PEPs were authorized under the SECURE Act of 2019 and became available in 2021. They can provide employers with a more centralized approach to retirement plan administration while still allowing them to offer employees an important workplace benefit.

But is a PEP right for every employer? Not necessarily.

Understanding how Pooled Employer Plans work, what responsibilities remain with the employer, and how they compare with a traditional standalone 401(k) can help you make a more informed decision.

What Is a Pooled Employer Plan?

A Pooled Employer Plan is a type of 401(k) retirement plan that allows multiple unrelated employers to participate in a single plan.

Before PEPs, traditional Multiple Employer Plans generally required participating employers to have a common business interest or affiliation. PEPs removed that requirement, opening the pooled structure to unrelated organizations.

Instead of each participating employer maintaining an entirely separate retirement plan, employers participate within the larger PEP structure.

For some organizations, this can reduce administrative demands and provide access to efficiencies that may be more difficult to achieve through a standalone plan.

How Does a Pooled Employer Plan Work?

Every PEP is managed by a Pooled Plan Provider, or PPP.

The Pooled Plan Provider serves as the named fiduciary responsible for administering the overall plan and coordinating many of its operational responsibilities.

Depending on the specific PEP arrangement, responsibilities may include:

• Plan administration

• Compliance coordination

• Required reporting

• Participant communications

• Investment oversight

• Coordination among retirement plan service providers

For an employer, this can mean spending less time coordinating the day to day administration of a retirement plan.

However, joining a PEP does not mean handing over every responsibility.

Does Joining a PEP Eliminate an Employer’s Fiduciary Responsibility?

No.

This is an important distinction for any employer considering a Pooled Employer Plan.

Although many administrative and operational responsibilities may shift to the Pooled Plan Provider, participating employers retain important fiduciary responsibilities.

Those responsibilities typically include prudently selecting the Pooled Plan Provider, monitoring the provider’s ongoing performance, making timely payroll contributions, maintaining accurate employee information, and ensuring the arrangement continues to serve employees’ best interests.

In other words, a PEP can reduce administrative responsibilities, but employers must still provide appropriate oversight.

Why Are Employers Considering Pooled Employer Plans?

There is no single reason an employer might consider a PEP. For many organizations, the appeal comes from a combination of administrative efficiency, access to experienced retirement professionals, and the potential benefits of participating in a pooled structure.

Reduced Administrative Burden

Operating a qualified retirement plan involves ongoing responsibilities, including compliance testing, government reporting, participant notices, vendor coordination, and operational oversight.

For organizations where these responsibilities fall to HR, payroll, finance, or executive staff, retirement plan administration can compete with other business priorities.

A PEP centralizes many administrative functions through the Pooled Plan Provider, potentially reducing the amount of time an employer spends managing plan operations.

Potential Cost Efficiencies

Because multiple employers participate in one plan, pooled purchasing power may create operational efficiencies and potential economies of scale.

Actual costs depend on the provider, plan design, services, and other factors, so employers should evaluate the complete fee structure before making a decision.

Access to Retirement Plan Expertise

A well-designed PEP can bring together professionals responsible for administration, compliance, investments, and participant services within a more integrated service model.

For employers that do not have extensive retirement plan expertise internally, that structure can be valuable.

More Time to Focus on Employees

Reducing administrative demands can also allow employers to spend more time focusing on employee education, retirement readiness, and workforce engagement rather than paperwork and compliance deadlines.

Pooled Employer Plan vs. Standalone 401(k): What Is the Difference?

The primary distinction is the plan structure.

With a standalone 401(k), one employer sponsors and maintains its own retirement plan.

With a Pooled Employer Plan, multiple unrelated employers participate in a single plan managed by a Pooled Plan Provider.

A standalone plan generally provides employers with greater flexibility over plan design. A PEP may use more standardized features in exchange for a more centralized administrative structure.

Fiduciary responsibilities also differ. In a standalone arrangement, more of those responsibilities generally remain directly with the employer. In a PEP, certain responsibilities are assumed by the Pooled Plan Provider, although the employer retains important oversight obligations.

Neither structure is automatically better. The appropriate choice depends on the needs of the organization.

Is a Pooled Employer Plan Right for Every Business?

No. A PEP can be an effective solution for some employers, but it is not automatically the right retirement plan structure for every organization.

When evaluating a PEP, employers should consider factors such as:

• Workforce size and employee demographics

• Desired plan flexibility

• Current retirement plan costs

• Internal administrative resources

• Fiduciary governance preferences

• Employee needs

• Long term business strategy

Some employers may value the centralized administration available through a PEP. Others may determine that the customization and control available through a standalone 401(k) better support their objectives.

The decision should be based on your organization’s needs, not simply on which retirement plan structure is newest.

What Questions Should Employers Ask Before Joining a PEP?

Before selecting a Pooled Employer Plan, employers should understand exactly what they are joining and who will be responsible for each component of the plan.

Important questions include:

• Who serves as the Pooled Plan Provider?

• What fiduciary responsibilities remain with our organization?

• How are investments selected and monitored?

• What services are included?

• What participant education is available?

• How are fees structured?

• Can the plan accommodate future organizational growth?

• What happens if another retirement plan structure better meets our needs in the future?

Asking these questions early can help establish clear expectations and make it easier to compare a PEP with other retirement plan options.

How Can Benefits Administrators Help Employers Evaluate Their Options?

Choosing a retirement plan involves more than comparing investment options or fees.

Employers should also consider plan design, administrative responsibilities, compliance requirements, fiduciary obligations, participant outcomes, and long term organizational goals.

Benefits Administrators has more than 30 years of experience helping employers navigate retirement plan decisions. As an independent retirement plan consulting and administration firm, we help organizations evaluate these considerations and understand how different plan structures may support their objectives.

Whether you are considering a Pooled Employer Plan, evaluating a standalone 401(k), or reviewing an existing retirement plan, our role is to help make a complex decision clearer.

Frequently Asked Questions About Pooled Employer Plans

What is a Pooled Employer Plan?

A Pooled Employer Plan, or PEP, is a retirement plan that allows multiple unrelated employers to participate in a single employer sponsored 401(k) plan administered by a Pooled Plan Provider.

What is the difference between a PEP and a Multiple Employer Plan?

Traditional Multiple Employer Plans generally required participating employers to share a common relationship or affiliation. PEPs allow unrelated businesses to participate together.

Does joining a PEP eliminate an employer’s fiduciary responsibility?

No. Employers retain important fiduciary responsibilities, including prudently selecting and monitoring the Pooled Plan Provider and ensuring the arrangement continues to be appropriate for their employees.

Are Pooled Employer Plans only for small businesses?

No. While PEPs can be attractive to small and mid sized employers, organizations of different sizes may determine that a pooled structure aligns with their operational needs and retirement plan objectives.

Is a PEP better than a traditional 401(k)?

Neither option is universally better. A PEP may offer administrative efficiencies and a more centralized service model, while a standalone 401(k) may provide greater flexibility and customization. The appropriate structure depends on the employer’s workforce, resources, objectives, and preferences.

Making an Informed Retirement Plan Decision

Pooled Employer Plans have given employers another option for structuring workplace retirement benefits. For some organizations, a PEP may help simplify administration, reduce operational demands, and provide access to experienced retirement plan professionals.

For others, a standalone retirement plan may remain the better fit.

The important question is not simply, “Should we join a PEP?” It is, “Which retirement plan structure best supports our organization and our employees?”

That is a question worth evaluating carefully.

If you are considering a Pooled Employer Plan, establishing a new retirement plan, or reviewing your current plan structure, contact Benefits Administrators to start a conversation about your organization’s needs.