Pooled employer plan (PEP)

What a PEP is

A pooled employer plan is a type of multiple employer plan created by the SECURE Act and available since January 1, 2021. Employers with no common industry or ownership can join the same plan. The plan is run by a pooled plan provider (PPP), which must register with the Department of Labor and the Treasury and which acts as the named fiduciary and the ERISA 3(16) plan administrator.

Why it matters to employers

Joining a PEP moves most plan administration off your desk. The plan files one Form 5500 for all participating employers, and an audit, if one is required, is performed at the plan level. You typically keep some design choices, such as your match formula and eligibility rules.

You do not hand off every duty. Each employer stays responsible for choosing the PEP and its pooled plan provider prudently, monitoring them, and sending accurate contributions and employee data on time. Unless the plan assigns investment decisions to another fiduciary, you may also remain responsible for the investments offered to your employees.

Example

A 30-person design studio joins a PEP instead of sponsoring its own plan. It keeps its own match, sends payroll data each pay period, and does not sign or file its own Form 5500. It reviews the pooled plan provider’s fees and service once a year and keeps notes of that review.

Common mistakes

• Assuming that joining a PEP ends all fiduciary responsibility. Selecting and monitoring the provider stays with you.

• Not asking which entity is the fiduciary for investments.

• Overlooking that nondiscrimination testing is generally still applied employer by employer.

• Confusing a PEP with a PEO plan. A PEO plan is a multiple employer plan tied to using that PEO.