Choosing the right pooled employer plan (PEP) can simplify 401(k) administration and reduce costs, helping smaller employers offer competitive retirement benefits. However, not all PEPs are created equal. This guide offers a practical checklist to evaluate and select a pooled plan provider (PPP) to protect employees, limit fiduciary liability, and make a cost-effective retirement plan decision.
What is a Pooled Employer Plan (PEP)?
A pooled plan provider (PPP) sponsors a single retirement plan, called a pooled employer plan (PEP), that allows unrelated employers to participate. The PPP assumes many administrative and fiduciary responsibilities, reducing the burden on individual employers. Participating employers retain specific monitoring duties and must understand which responsibilities remain theirs. Click here for more information about fiduciary responsibility in pooled employer plans.
Key benefits of a PEP:
- Employers share in a larger pool and can benefit from economies of scale
- The PPP manages most compliance, recordkeeping, and investment duties
- Employers monitor plan performance and provider compliance
Plan Design Considerations
Before evaluating providers, it’s essential to define your plan design priorities. A thoughtfully structured plan can maximize employee participation, optimize tax advantages, and support talent retention.
Employer contributions form the backbone of a successful plan. Consider:
- Fixed contributions
- Matching contributions
- Profit-sharing components
- Vesting schedules
Plan features can enhance engagement and support participant success. Consider:
- Auto-enrollment and auto-escalation
- Roth options
- Loan provisions and hardship withdrawals
- Investment education and advice
Employee demographics should inform plan design. Consider:
- Age distribution
- Income levels
- Financial literacy and investment preferences
Documenting these priorities ensures your evaluation of PEPs is aligned with your organization’s unique needs rather than generic criteria.
Evaluating the Pooled Plan Provider (PPP)
Because the PPP oversees every PEP, assessing its qualifications and experience is critical. Look for a provider with:
Experience and Expertise
A strong pooled plan provider (PPP) should have a proven track record working with organizations like yours. This includes deep knowledge of the retirement industry, compliance requirements and investment management. Providers with relevant experience can anticipate challenges and provide practical solutions to ensure your PEP delivers strong outcomes for both employers and participants.
Organizational Stability and Resources
The stability of a PPP is critical for long-term success. Look for a provider with years of experience, solid financial health and a professional team capable of supporting your plan.
Regulatory Standing
Compliance is a non-negotiable part of a successful PEP. Verify that the provider is appropriately registered with the Department of Labor, has a clean compliance record and no unresolved regulatory actions or penalties. A strong regulatory standing helps protect your organization from risk and demonstrates that the provider follows industry best practices.
Service Provider Network
The quality of a provider’s network directly affects plan administration and participant experience. High-quality third-party administrators, reliable recordkeeping platforms and robust technology infrastructure ensure accurate and effective participant support.
Investment Lineup and Fee Insights
Investment options are central to participant outcomes and satisfaction. Be sure to consider:
- Include mutual funds, collective investment trusts (CITs), ETFs, separate accounts, and Target Date Funds.
- Consider specialty options such as ESG funds, brokerage windows, or managed accounts to give employees options.
- Philosophy and governance
- Understand the investment policy statement, committee structure, and manager selection criteria.
- Review performance evaluation processes and the frequency of oversight.
- Fee transparency
- Assess all costs, including recordkeeping, investment management, advisory, and participant-specific fees.
- Compare total cost to services provided; lower fees don’t always equate to better value.
The investment lineup should be well-diversified, align with employee demographics and provide sufficient choice without being overwhelming.
Ongoing Oversight and Fiduciary Considerations
Even after selecting a PEP, ongoing oversight is critical:
- Confirm the allocation of fiduciary responsibilities, including 3(16) administrative, 3(38) investment, and 3(21) advisory services.
- Review fiduciary liability coverage and understand which responsibilities remain with your organization.
- Conduct annual reviews of plan performance, fees, compliance reports and participant outcomes.
Selecting the Right PEP for Your Organization
Choosing a pooled employer plan (PEP) requires weighing more than just costs. Employers should consider provider experience, investment options, fiduciary support, and administrative capabilities to find the best fit for their employees.
Boulay’s RetireNAV(k) PEP solution is designed to reduce administrative burden while delivering competitive retirement benefits. Our pooled employer plan can help employers reduce their administrative burden while providing top-tier retirement benefits to their employees.
Connect with us to see how RetireNAV(k) can simplify your retirement plan and deliver meaningful benefits to your team.