PEPs Continue to Gain Momentum
Since 2021, Pooled Employer Plans, or PEPs, have enabled multiple unrelated employers to participate in a defined contribution retirement plan by using a single designated plan sponsor, known as a Pooled Plan Provider, or PPP. The SECURE Act of 2019 (SECURE 1.0) contained a provision that was designed to make it easier and less expensive for smaller businesses to participate in a plan along with other unrelated employers. Since that time, we have found that PEPs appeal to a broader range of employers than Congress originally contemplated. Other trends have also emerged, showing that PEPs may have a brighter future than even the most optimistic proponents expected.
PEPs Meet a Need for Small Employers
By including the PEP provision in SECURE 1.0, Congress was trying to address the long-acknowledged shortage of retirement plans among smaller employers in the U.S. Congress has been trying various means to encourage small businesses to adopt retirement plans, including an increase in the small business tax credit for plan start-up costs, which was found in the SECURE 2.0 Act passed at the end of 2022.
SECURE 2.0 also included a provision that requires the Department of Labor (DOL) to report to Congress every five years on the state of the PEP industry. In fulfilling this requirement, the DOL released a Request for Information (RFI) that is intended to address various aspects of the first report, which is due in December 2026. This RFI contains numerous questions for interested parties to respond to. It also contains a helpful background on PEPs and the DOL’s interpretation of the most recent PEP information available through annual plan filings. One noteworthy comment in this RFI: “Many of these PEPs appear [ ] to be delivering on Congressional intent by offering diversified investment lineups at a lower cost than small plans could likely negotiate on their own behalf.” So far, at least, PEPs seem to be meeting a need that Congress was trying to address.
Some Larger Trends Are Emerging
But it turns out that PEPs are also being embraced by employers that were not initially targeted by Congress—and for reasons that go far beyond mere cost savings. Because a Pooled Plan Provider (PPP) takes over the duties of the plan sponsor and plan administrator, PEPs can appeal to a much broader range of employers than just small employers.
PEPs are not only for small employers
As revealed in the Department of Labor’s RFI, a review of recent Form 5500 filings show that even larger employers are taking advantage of PEP benefits. Of the 12 largest PEPs, half of them served employers that averaged at least 188 participants per participating employer. This is well above the targeted “small employer” range that typically includes those with 100 or fewer employees. So, while some PEPs may focus on serving the traditional small employer market, others are bringing larger employers into the fold as well.
PEPs provide more than cost savings
These larger employers have discovered that PEP benefits extend far beyond economics. Larger employer plans usually have enough assets to qualify for cheaper investment options (e.g., mutual fund “R shares” or collective investment trusts (CITs)). But there are other reasons for these employers to choose a PEP rather than a standalone single employer retirement plan.
- Simplified plan administration. The PPP assumes the day-to-day plan administration, freeing participating employers to focus on running their businesses.
- Strengthened plan compliance. The PPP typically takes responsibility for such tasks as nondiscrimination testing, loan administration, and annual audits and reporting.
- Reduced fiduciary responsibility. By outsourcing most fiduciary duties to the PPP, employers lessen their burden of knowing all the details that can trip them up.
Of course, all these benefits can also reduce expenses for employers, either in direct savings or through efficiencies and risk mitigation. And as the PEP market continues to mature, additional cost reductions seem likely to follow.
Pentegra is Your PEP Partner
The bottom line is that the retirement plan landscape is evolving. Advisors who embrace Pooled Employer Plans (PEPs) can gain a decisive edge—helping clients simplify plan management while expanding their own business opportunities. PEPs are more than just a new retirement vehicle; they’re a gateway to stronger client relationships, differentiated service, and scalable growth.
With more than 80 years of fiduciary expertise and deep experience as one of the nation’s leading Multiple Employer Plan (MEP) and PEP providers, Pentegra delivers the expertise, infrastructure, and partnership you need to succeed in the evolving retirement plan landscape.
Pentegra can serve as a Pooled Plan Provider (PPP) and/or an ERISA 3(16) Plan Administrator for your PEP. We’re ready to partner with you to bring maximum flexibility to every PEP opportunity and deliver the best end-to-end solution for you and your clients.
Position yourself as the advisor of choice. Talk to a Pentegra expert about how PEPs can power your growth and your clients’ success. Contact the Pentegra Solutions Center at solutions@pentegra.com or 855-549-6689.
The information, analyses and opinions set out herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. Nothing herein constitutes or should be construed as a legal opinion or advice. You should consult your own attorney, accountant, financial or tax advisor or other planner or consultant with regard to your own situation or that of any entity which you represent or