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Pooled Employer Plans Are The Small Business Retirement Plan "Silver-Bullet" Solution

401(k) Plans PEPs Regulatory Updates

Key Takeaways

  • Pooled Employer Plans (PEPs) were recently created through federal legislation, updating ERISA and DOL standards.
  • Traditional 401(k) plans are subject to different requirements, while PEPs were designed with small businesses in mind.
  • To offer a PEP, an employer must enlist the services of a professional fiduciary.

Employee Fiduciary, much like PLANSPONSOR, has been on top of their research game. 401(k) plans are required by the Employee Retirement Income Security Act (ERISA) and the Department of Labor (DOL) regulations to be audited by an independent auditor if they are considered a "large plan" with more than 100 participants, and to file an additional audit report along with their annual Form 5500. The changes made by the DOL pertain specifically to workplace retirement plans in regards to how they count their participants- a lengthy and unnecessary explanation for employers that outsource their investment liability and day-to-day plan operations to a 3(16) and 3(38) fiduciary.

We admit we started reading their article, and our first thought was, "if you don't want to have to do an annual audit, and you're a small business, why wouldn't you just have a PEP?", we realize that as a full-service fiduciary firm with investment management and plan administration in-house, it isn't common knowledge.

A Pooled Employer Plan (PEP) is a type of qualified, workplace retirement plan that allows unrelated businesses to pool their assets together to aggregate at the same rate as larger, corporate employers- allowing small businesses to compete with corporate employee benefits. PEPs are a new kind of retirement plan having only been established int he last year by the SECURE Act and SECURE 2.0 Act. Previously, the most similar option was a Multiple Employer Plan that was far more costly, complicated, and excluded businesses that were not in the same industry. PEPs nullified the "bad apple rule" of MEPs, as well, stating that one company plan that is out of compliance does not have the ability to throw all of the other participating company plans into question. That said, PEPs are also the perfect retirement savings plan for businesses that do not have the same access to traditional capital and banking methods- such as cannabis related companies.

To put it as plainly as possible for employers with >100 employees:

  • Pooled Employer Plan = No Annual Audit & 1 Singular 5500 Form
  • Omnibus trust structure shields participants identities
  • Multiple businesses pooling their 401(k) assets together to yield higher returns, and experience less volatility 
  • No Annual Audit = Saving $7,500+

Yes, it is that simple, and a no-brainer. If you're a #smallbusiness you should evaluate your PEP options, especially if you reside in one of the 19 states mandating retirement plans for even the smallest of employers. If you would like us to contact you with more information, or to schedule a complimentary proposal, we would be happy to evaluate if a PEP is right for your business:

To read the full article from our peers at Employee Fiduciary: https://www.employeefiduciary....

To find out what your state requires of you as a small business owner, please visit our state mandate page:

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