- Key Insight: Learn how PEPs can reconfigure small-employer retirement plan delivery and adviser value propositions.
- Expert Quote: Deb Dupont (LIMRA): Advisers risk missing PEP-driven client opportunities in the small-business segment.
- Forward Look: Expect rising PEP adoption among midsize plans; advisers should prepare operationally.
Source: Bullets generated by AI with editorial review
At a time when working Americans are struggling to save enough for retirement, or even pay their bills, pooled employer plans (PEPs) are an opportunity for smaller businesses to improve retirement readiness in the defined contribution plan space.
The problem is that only about one-third of defined contribution plan advisers are even familiar with PEPs, research from global trade association LIMRA found. Still, advisers are eager to learn more about these vehicles, explained Deb Dupont, head of institutional retirement research at LIMRA. She said one explanation is the smaller number of advisers who specialize in defined contribution plans.
LIMRA's research categorized these individuals into three groups. One was defined as "occasional" advisers who serve more as wealth managers, only about 17% of whom are familiar with PEPs despite being more likely than other advisers to be working with smaller businesses. While they may sell a handful of 401(k) plans, it's done to accommodate or attract those wealth clients.
Another categorization is "specialist" advisers, about two-thirds of whom are familiar with PEPs and 71% of their income on average is derived from DC plans. But they tend to defer to PPP as a primary source of information on PEPs. The third group, "hybrid" advisers, for whom about 40% are familiar with PEPs, tend to be more like specialists.
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The enormity of opportunity to sponsor PEPs and boost retirement savings becomes clear considering that the U.S. government classifies 99.9% of all companies as small businesses. Noting that 95% of smaller businesses employ about half of all working Americans, Dupont noted that this segment of the workforce is where there's a huge retirement-savings coverage gap.
PEPs, created by the SECURE Act of 2019 and available since 2021, are primarily intended to help small and midsize employers that previously never offered a retirement plan reduce administrative burdens. A pooled plan provider (PPP) acts as the sponsor and administrator of a PEP and assumes most fiduciary responsibilities. Two examples are payroll companies and professional employer organizations.
More than 50,000 employers have adopted a PEP, according to
At the end of 2024, the most recent year for which data is available, about $21 billion in assets were held in one of more than 339 available PEPs.
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"There's a real opportunity here among smaller advisers who service the smaller plans that are the intended target for a PEP," Dupont said, noting that recordkeeper or main source of information for them. Only about a quarter of them currently view PEPs as a way to attract new clients, while roughly half feel the impact on their practice will be minimal if there's any change at all.
In contrast, nearly half of advisers who specialize in the defined contribution plan market feel that PEPs represent an opportunity to attract more clients. LIMRA is also seeing an unexpectedly high interest in a pooled solution among larger plans serviced by specialist advisers, according to Dupont, who said about half of PEP growth is with plans involving more than 50 employees.
Lowering the barrier to entry
Many small employers would like to offer a retirement savings plan but get intimidated by the cost, complexity and fiduciary responsibility that comes with sponsoring one, observed Jay Schmitt, a principal with Strategic Benefits Advisors.
"PEPs lower that barrier to entry," he said. "The challenge is making sure employers don't assume the PEP solves everything. The plan still has to be designed well, communicated well, and supported by features like automatic enrollment and automatic escalation. A PEP can create access. Retirement readiness still depends on what happens after that."
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In terms of coordinating PEPs with state-run retirement savings initiatives, health savings accounts, personal savings and any other vehicles to help pad nest eggs, Schmitt doesn't think of it as an either-or decision. He advised plan sponsors not to spend much time trying to engineer the perfect combination of savings vehicles and instead focus on making participation easy, and helping employees understand why saving matters.
If a small employer can offer a PEP, it's probably going to provide more flexibility and higher contribution opportunities than most state-run programs, he explained. But he hastened to add that the bigger issue is helping people develop the habit of saving.
"The earlier people start and the more consistently they save, the better off they're going to be," he said. "Most Americans are going to need multiple sources of savings if they're going to retire comfortably."
