A Pooled Employer Plan (PEP) is a type of retirement plan that allows multiple small to medium-sized employers to pool their resources and provide a retirement plan to their employees. This type of plan was created by the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law in December 2019. The main goal of a PEP is to make it easier and more affordable for small employers to offer a retirement plan to their employees, while also reducing the administrative burden and costs associated with traditional retirement plans.
How PEPs Work
A PEP is a type of defined contribution plan, which means that employees contribute a portion of their salary to the plan, and the employer may also make contributions. The plan is administered by a pooled plan provider, which is a financial institution or other organization that is responsible for managing the plan and handling all of the administrative tasks. This includes tasks such as plan design, investment management, and compliance with regulatory requirements.
The pooled plan provider is also responsible for investment management, which means that they will select and monitor the investment options that are available to participants. This can include a range of investment options, such as stocks, bonds, and mutual funds. The provider will also handle all of the compliance and reporting requirements, which can be time-consuming and complex.
Benefits of PEPs
There are several benefits to using a PEP, including:
- Reduced administrative burden: By pooling resources with other employers, small businesses can reduce the administrative tasks and costs associated with offering a retirement plan.
- Increased investment options: PEPs can offer a range of investment options, which can be beneficial for employees who want to diversify their retirement savings.
- Lower costs: PEPs can be less expensive than traditional retirement plans, which can make them more affordable for small employers.
- Easier setup: PEPs are designed to be easy to set up and administer, which can make them more appealing to small employers who may not have the resources or expertise to manage a traditional retirement plan.
Overall, PEPs can be a good option for small to medium-sized employers who want to offer a retirement plan to their employees, but may not have the resources or expertise to manage a traditional plan.
Setting Up a PEP
Setting up a PEP is relatively easy, and can be done in a few simple steps. The first step is to select a pooled plan provider, which will be responsible for administering the plan and handling all of the administrative tasks. The provider will work with the employer to design the plan, which includes selecting the investment options and determining the contribution rates.
Once the plan is designed, the employer will need to adopt the plan, which involves signing a plan document and agreeing to the terms of the plan. The employer will also need to notify their employees about the plan, and provide them with information about how to participate.
| Step | Description |
|---|---|
| 1 | Select a pooled plan provider |
| 2 | Design the plan |
| 3 | Adopt the plan |
| 4 | Notify employees |
PEP Providers
There are several types of organizations that can serve as PEP providers, including:
- Financial institutions: Banks, insurance companies, and other financial institutions can serve as PEP providers.
- Investment companies: Investment companies, such as mutual fund companies, can also serve as PEP providers.
- Third-party administrators: Third-party administrators, such as retirement plan administrators, can serve as PEP providers.
When selecting a PEP provider, it's a good idea to research their experience and reputation, as well as their fees and services. This can help ensure that the provider is a good fit for the employer and their employees.
What is a Pooled Employer Plan?
+A Pooled Employer Plan (PEP) is a type of retirement plan that allows multiple small to medium-sized employers to pool their resources and provide a retirement plan to their employees.
How do I set up a PEP?
+To set up a PEP, you will need to select a pooled plan provider, design the plan, adopt the plan, and notify your employees. You may also want to work with a financial advisor or other expert to help with the setup and administration of the plan.
What are the benefits of using a PEP?
+The benefits of using a PEP include reduced administrative burden, increased investment options, lower costs, and easier setup. PEPs can also be less expensive than traditional retirement plans, which can make them more affordable for small employers.
