Should Your Business Consider a Pooled Employer 401(k) Plan?

If you're a small business owner looking for a low-cost, low-effort retirement plan for your employees,  one option you should consider its a Pooled Employer Plan (PEP).

Created by the SECURE Act of 2019, PEPs allow multiple unrelated employers to join together in a single 401(k) retirement plan. Think of it like a buying cooperative for 401(k) plans – businesses band together to achieve lower costs and fewer administrative headaches.

PEPs are open to employers establishing a new 401(k) plan or those looking for a better way to administer their existing plan.

But is a PEP right for your company? Here are some key advantages and considerations.

One of the biggest draws of PEPs is cost savings through economies of scale. Functions like filing required government forms, conducting audits, and investment management are handled at the plan level rather than by each employer separately. By pooling assets into a single larger plan, you benefit from more efficient and diversified investments along with reduced administrative costs.

An added bonus: if you're starting a new 401(k) plan, your business may be eligible for a SECURE Act tax credit of up to $15,000 over three years. While this applies to any new 401(k) plan, it's particularly powerful when combined with the already thrifty PEP structure.

With over $10 billion in assets and more than 24,000 employers already participating in PEPs nationwide, the cost benefits are becoming increasingly attractive.

Perhaps the greatest relief for busy business owners is the "one-stop shopping" approach. The pooled plan provider acts as both plan administrator and named fiduciary, taking responsibility for most administrative duties and compliance requirements. This significantly reduces your plan setup responsibilities, including contracting with vendors and choosing investment managers.

Your fiduciary responsibilities are dramatically reduced – you're primarily responsible for choosing and monitoring the pooled plan provider, rather than managing the entire plan operation. This means less paperwork, fewer regulatory headaches, and more time to focus on running your business.

PEPs aren't without drawbacks. You'll likely have limited or no ability to choose record-keepers, and the investment menu will be predetermined by the pooled plan provider. If your business has specific needs – like different benefit structures for various employee groups or a desire to handpick investment options – a PEP might feel restrictive.

This inflexibility in plan design can be a significant consideration for employers who want to customize their benefits to match their company culture or employee demographics.

PEPs are typically most attractive to small and medium-sized employers who want economies of scale and are willing to cede control over their plans in exchange for reduced costs and administrative burden. They're particularly beneficial for:

• Businesses with 10-100 employees
• Businesses without dedicated HR departments
• Organizations that want to offer competitive benefits without becoming retirement plan experts
• Employers seeking to minimize fiduciary liability

FTJ Retirement Advisors can help you determine whether a PEP or a traditional 401(k) plan is the right choice for your company.

We also consult with organizations on creating and managing 403(b) and 457 retirement plans.

FTJ offers a comprehensive 401(k) PEP solution that combines cost-effectiveness with personalized service. Our independent model provides unbiased, premium-class solutions, while our co-fiduciary approach helps limit your liability.

We take a high-touch, personalized approach to understand your individual needs, backed by award-winning technology that keeps your plan running smoothly.

Contact Brian Holland, our Director of Retirement Services, to discuss how a Pooled Employer Plan could benefit your business and employees. Let's explore whether joining forces with other employers could be the key to offering better retirement benefits at a lower cost.