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  • Writer's pictureKevin Buckley, CEBS

Unlocking the Advantages of a Pooled Employer Plan for Small Businesses and Employees

Pooled Employer Plans (PEPs) offer numerous benefits for businesses, particularly small and medium-sized ones, looking to provide retirement benefits to their employees. A key advantage of these plans is the elimination of individual plan audits, which contributes significantly to their overall appeal. Here’s an overview of the benefits, including this crucial aspect:



  1. Cost Savings from Eliminated Plan Audits: Typically, individual 401(k) plans are subject to annual audits if they have more than 100 participants with balances, a process that can be costly. In a PEP, the audit requirement is on the plan level, not the individual employer level. This can result in significant cost savings for each participating employer, as they are no longer responsible for their own plan audits.

  2. Reduced Administrative Responsibilities: Managing a retirement plan can be complex and time-consuming. In a PEP, the Pooled Plan Provider (PPP) takes on much of the administrative burden, including compliance with regulatory requirements and the handling of the required audit for the entire plan.

  3. Mitigation of Fiduciary Risk: Employers participating in a PEP have reduced fiduciary responsibilities. The PPP assumes much of the fiduciary liability, including the responsibilities associated with investment selections and plan operations.

  4. Simplified Compliance: Compliance with retirement plan regulations can be daunting, especially for smaller businesses. By joining a PEP, employers benefit from the PPP’s expertise in ensuring that the plan remains compliant with all regulatory requirements, including those that would typically necessitate an audit.

  5. Attractive Employee Benefit: Offering a competitive retirement plan is key to attracting and retaining talented employees. PEPs allow smaller employers to offer a robust retirement plan that might otherwise be too costly or complex to administer independently.

  6. Economies of Scale: PEPs pool the assets of multiple employers, leading to potentially lower investment fees due to the larger asset base. This can result in better investment options and potentially higher returns for plan participants.

  7. Flexibility and Customization: While PEPs are a collective solution, they often offer a degree of customization in terms of investment options and other plan features, allowing employers to address the specific needs of their workforce.

  8. Professional Management: Employers and their employees benefit from professional management of the retirement plan, which can lead to more prudent management and diversified investment choices.

  9. Increased Accessibility for Small Businesses: Small businesses often find it challenging to offer retirement plans due to costs and administrative burdens. PEPs provide an accessible pathway for these businesses to offer a valuable retirement benefit to their employees.

  10. Portability for Employees: PEPs offer the advantage of portability for employees. As they move between employers participating in the same PEP, they can continue contributing to the same plan, which simplifies their retirement savings strategy.

Pooled Employer Plans provide a cost-effective, administratively simplified, and compliant option for businesses to offer retirement benefits. The elimination of individual plan audits significantly reduces the financial and administrative burden for participating employers, making PEPs particularly advantageous for smaller businesses.


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