What Is a Pooled Employer Plan (PEP)?
A PEP is a type of retirement plan that allows unrelated employers to join together in a single retirement plan, pooling resources, sharing responsibilities, and simplifying plan administration.
Instead of each company managing its own 401(k) plan, a PEP is sponsored by a Pooled Plan Provider (PPP) who handles much of the administrative and fiduciary duties on behalf of participating employers (called “adopting employers”).
Employers That Can Benefit from PEPs
A PEP can be a strong fit for organizations that want the benefits of a high-quality retirement program without the administrative lift. While solutions are often tailored for small to mid-sized employers, they can significantly benefit companies of all sizes, including private-equity-backed firms. These organizations frequently face challenges in balancing the priorities of their owners, employees, and strategic objectives, particularly in retirement plan management. PEPs can offer a solution by allowing these firms to outsource plan management responsibilities, thus helping lower costs and assisting with regulatory compliance, while providing consistent participant experience, allowing more time to focus on strategic goals.
How a PEP Works
- The PPP serves as the plan sponsor and main fiduciary.
- Adopting employers choose to join the pooled plan rather than creating their own retirement plan solution.
- Each employer’s plan is tracked and administered individually within the pooled structure.
