Pooled Employer Plans

Pooled Employer Plans

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What is a Pooled Employer Plan?

A pooled employer plan (PEP) is a 401(k) retirement plan that allows unrelated businesses to participate in one plan managed by a pooled plan provider (PPP). The PPP is the fiduciary of the PEP and has discretion over plan administration and investments, which can reduce the administrative burden and risks for participating companies. Streamlining and delegating retirement plan administration to experts allows employers to focus on their core business and other strategic priorities.

The PPP is also responsible for selecting and monitoring third-party vendors hired to deliver services for the PEP, including trustees/custodians, recordkeepers, investment managers and external advisors such as plan auditors. PEPs have emerged as an attractive alternative to traditional 401(k)s – reducing the work and risk involved in sponsoring a plan and offering significant opportunities for economies of scale and improved retirements for American workers.

The SECURE Act and PEPs

The SECURE Act, formally known as the Setting Every Community Up for Retirement Enhancement Act, allowed PEPs to enter the market in 2021. Before this law, employers could only join together under a multiple employer plan (MEP) if they had some commonality with other participants (e.g., similar industry or geography). Essentially, the SECURE Act broadens access to pooled 401(k) plans to any employer operating in the U.S. It also protects individual plan sponsors who join a PEP from being jointly and severally liable for issues that arise with other plan sponsors participating in the PEP (i.e., the SECURE Act legislation protects organizations from the historic "one bad apple" rule).

In 2022, Congress passed the SECURE 2.0 Act of 2022. Key themes of the legislation include:

  • Supporting effective and prudent use of defined benefit pension plan assets
  • Increasing retirement savings through automation, incentives and flexibility
  • Improving outcomes in 403(b) plans by allowing access to PEPs and potentially collective investment trusts in the future

What are the Benefits of a Pooled Employer Plan?

  • Improved Outcomes

    Improved retirement outcomes and lower costs for employees. Employers of all sizes gain economies of scale while delivering a great 401(k) plan with a robust investment lineup.

  • Less Work

    Less work for management teams. Streamlining and delegating plan administration to experts allows employers to focus on other strategic priorities.

  • Reduced Risk

    Reduced risk for employers and fiduciaries. The PPP is the fiduciary of the PEP and has discretion over plan administration and investments, which can reduce risks for participating companies.

How Does the Aon PEP Work?

  • Aon's Role
    In our PEP model, Aon operates as the pooled plan provider (PPP) and named fiduciary. This means we are responsible for all plan operation and compliance and oversee and monitor all related service providers. As the PPP, Aon's responsibilities include serving as the 402(a) fiduciary, ERISA 3(16) plan administrator and ERISA 3(38) investment advisor.1 Overall, joining a PEP will allow your team to focus more energy on building a resilient workforce while shifting key administrative tasks to your provider, including:
    • Audits and Form 5500 preparation
    • Communication and education
    • Compliance requirements
    • Fiduciary oversight
    • Financial wellness
    • Investment decisions
    • Nondiscrimination testing
    • Participant experience
    • Plan documents and SPDs
    • Quarterly reporting
    • Recordkeeping
    • Regulatory updates
    • Vendor selection and monitoring
  • Service Providers

    Aon partners with the following service providers to deliver our PEP:

    • Recordkeeper and trustee: Voya
    • Auditor: Grant Thornton
    • Investment managers: State Street, Invesco, Dodge & Cox, PIMCO, T. Rowe Price and more
    • Self-directed brokerage window (SDBW): TD Ameritrade
  • Flexible Plan Design

    We offer employers the flexibility to define 401(k) eligibility for employees, vesting provisions, employer matching and other contribution levels.

    Participants can also choose from pre-tax, after-tax and Roth contribution opportunities.

    Finally, we offer a range of target date, index funds and active management investment options, as well as access to the broader market through the TD Ameritrade platform.

  • Employer Role

    Most importantly, employers will be able to define their own plan design – ensuring they have the right benefits to effectively compete for talent in today’s competitive and dynamic employment environment. In addition, your organization will be able to transfer most fiduciary obligations and ongoing administrative duties to Aon as the PPP. However, you will still need to retain the fiduciary role of selecting a PEP and overseeing and monitoring the PEP and its performance.

1Investment advice and consulting provided by Aon Investments USA Inc.

 

100+

The Aon PEP is designed for companies with at least 100 employees participating in the 401(k) plan.

What are Clients Saying About Aon's PEP?

Watch our Q&A with Munu Gandhi, President and COO of ITsavvy, for a business’ firsthand account of why they decided to go with a pooled employer plan, what the process was like for their organization and how the Aon PEP helped.

Streamlining and delegating retirement plan administration to experts allows employers to focus on their core business and other strategic priorities.

What Are Clients Saying About the Aon PEP?

Rick Harman, Vice President of Total Rewards for ID.me, shares his experience with implementing the Aon PEP. Rick discusses the on-boarding process and employee communications, as well as the reduced risk that the Aon PEP has brought to ID.me.

More PEP Insights

Read the latest articles, reports and podcasts about pooled employer plans from our team of thought leaders.

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