Pooled employer plans (PEPs) have earned their reputation as a practical solution for smaller employers. But as adoption grows, larger, more sophisticated retirement plan sponsors have started wondering whether a PEP might work for them, too. The answer, however, is complicated and advisers should know why before they broach the topic.
A PEP is a single defined contribution plan shared by multiple unrelated employers. Instead of each company sponsoring and administering its own 401(k), they participate together in one plan run by a pooled plan provider (PPP) that serves as the plan’s named fiduciary and administrator, coordinating compliance, recordkeeping, government filings, participant notices and all other functions required to operate the plan. The underlying mechanics are identical to a traditional 401(k). Contribution limits, tax treatment and participant rights are all unchanged.
