The Pooled Employer Plan Advantage: Simplifying Retirement for Businesses
When serving up a retirement plan to your employees, your investment policy statement (IPS) is the secret sauce. A well-crafted IPS outlines the guiding principles for choosing and managing plan investments, helping ensure a broad and diverse menu of options is available. It’s also a fiduciary best practice—although not required by law, the IPS is one of the primary documents the Internal Revenue Service and U.S. Department of Labor request when they conduct plan audits. Here are some of the key ingredients that can help make your IPS a recipe for success:
- A Pooled Employer Plan (PEP) allows multiple businesses to participate in a single, professionally managed retirement plan
- A PEP employer plan reduces administrative burden and fiduciary risk while providing employees with competitive retirement benefits
- PEP retirement plan providers handle plan administration, compliance, and investment management, making retirement planning easier for employers
What Is a Pooled Employer Plan (PEP)?
A PEP retirement plan is a modern retirement solution designed to help small and mid-sized businesses offer 401(k) benefits without the complexity of traditional single-employer plans. A pooled employer plan allows multiple, unrelated businesses to join a single, professionally managed retirement plan, reducing administrative responsibilities and overall costs.
Before the SECURE Act of 2019, small businesses often faced barriers to offering retirement plans due to high costs, compliance complexities, and fiduciary liability. A PEP employer plan solves these challenges by consolidating plan management under a single provider, making it easier for companies to provide competitive benefits.
Benefits of a PEP Employer Plan
- Reduced Administrative Burden
Managing a 401(k) plan involves time-consuming tasks such as compliance reporting, investment selection, and participant communication. With a pooled employer plan, these responsibilities shift to a third-party administrator, freeing business owners to focus on their core operations.
- Lower Costs Through Economies of Scale
One of the most attractive aspects of a PEP employer plan is its cost efficiency. Because multiple businesses contribute to the plan, administrative costs and investment fees are often lower than those of standalone 401(k) plans. This allows small and mid-sized companies to offer high-quality retirement benefits without a significant financial burden.
- Simplified Compliance & Fiduciary Protection
Compliance with ERISA regulations and IRS requirements can be daunting for employers. By joining a PEP retirement plan, businesses offload much of their fiduciary responsibility to experienced PEP retirement plan providers who manage compliance, audits, and regulatory filings. This reduces legal risks and ensures the plan remains in good standing.
- Improved Employee Benefits & Retirement Readiness
A well-structured PEP retirement plan gives employees access to better investment options, professional plan management, and educational resources. By offering a competitive retirement plan, businesses can enhance employee satisfaction, improve retention, and attract top talent.
Who Can Join a PEP Retirement Plan?
One of the key advantages of a PEP employer plan is its accessibility. Any qualifying employer—whether a small business, startup, nonprofit, or even a larger corporation—can participate. This allows companies of all sizes to provide their workforce with a high-quality retirement plan that may have been cost-prohibitive as a standalone 401(k).
Even businesses that already offer a retirement plan can benefit from switching to a PEP retirement plan, as it may provide cost savings, administrative relief, and stronger investment management.
Choosing the Right PEP Retirement Plan Providers
Not all PEP retirement plan providers are the same. When selecting a provider, employers should consider factors such as:
- Experience and Reputation – Does the provider have a strong track record in managing pooled retirement plans?
- Compliance and Fiduciary Support – Will the provider assume fiduciary responsibility and ensure regulatory compliance?
- Investment Options and Fees – Are the investment choices competitive, and are the fees transparent?
- Participant Support – Does the provider offer educational resources and tools to help employees maximize their retirement savings?
A well-managed pooled employer plan can significantly enhance a company’s retirement benefits while reducing workload and expenses. By partnering with an experienced PEP retirement plan provider, businesses can offer employees a secure path to retirement with minimal effort.
Ready to Explore a Pooled Employer Plan?
A PEP employer plan could be the key to simplifying your company’s retirement benefits while improving cost efficiency and compliance. If you’re ready to learn more about how a PEP retirement plan can benefit your business, visit our webpage on PEPs and, specifically, our TRA Select 401(k) PEP solution!
