Pooled Employer Plans (PEPs)—A Strategic Opportunity for Advisors
The retirement plan marketplace is undergoing a quiet revolution—and it’s being led by a powerful new tool: the Pooled Employer Plan, or PEP. Introduced by the SECURE Act of 2019 and officially available since January 1, 2021, PEPs have redefined what’s possible for employers seeking to offer competitive, compliant, and cost-effective retirement benefits to their employees.
More than three years in, the momentum behind PEPs continues to build. And for good reason: PEPs offer a streamlined solution that reduces employer burden, lowers administrative risk, and improves access to high-quality retirement plans—especially for small and mid-sized businesses. As more employers and advisors explore pooled plan options, it’s clear that PEPs are more than a passing trend—they’re likely to reshape the retirement landscape in meaningful and lasting ways.
The PEP Advantage: Scale, Simplicity, and Shared Responsibility
At their core, PEPs allow unrelated employers to participate in a single retirement plan administered by a third-party Pooled Plan Provider (PPP). This model offers several key advantages over traditional single-employer plans:
- Reduced Administrative Burden
Employers that join a PEP hand off much of the day-to-day responsibility to the PPP, including plan administration, compliance, annual filings, and participant notices. This shift dramatically simplifies plan management for business owners and human resources (HR) teams, freeing them to focus on running their business rather than navigating the complexities of the Employee Retirement Income Security Act of 1974 (ERISA). - Cost Efficiency Through Scale
By pooling assets and participants, PEPs can often negotiate better pricing on investments, recordkeeping, and fiduciary services. The aggregated scale can often reduce plan costs for each participating employer, particularly benefiting smaller employers who previously lacked access to institutional pricing. - Minimized Fiduciary Risk
PEPs transfer many fiduciary duties to the PPP and other designated fiduciaries (such as ERISA 3(38) investment managers or ERISA 3(16) plan administrators). For employers, this shift means less personal liability and greater confidence that their plan is being run in accordance with ERISA standards. - Greater Access and Inclusion
PEPs lower the barrier to entry for small and medium-sized businesses that may have previously opted out of offering retirement benefits due to cost or complexity. By democratizing access to high-quality plans, PEPs can help narrow the retirement coverage gap—a longstanding challenge in the U.S. workforce.
Key Trends Accelerating PEP Adoption
Since their introduction, several trends have helped accelerate interest and adoption of PEPs across the marketplace:
- Regulatory Clarity and Support
The Department of Labor (DOL) and Internal Revenue Service (IRS) have provided detailed guidance to help plan sponsors, providers, and advisors navigate the rules governing PEPs. This regulatory support has reassured many employers that the PEP model is a viable alternative to offering retirement benefits. - Advisor and Recordkeeper Engagement
Leading retirement plan advisors and recordkeepers have embraced PEPs as a strategic growth tool. Advisors see PEPs as a scalable way to serve more clients while standardizing plan design and reducing operational complexity. Recordkeepers, meanwhile, are investing in technology and services to support efficient onboarding, reporting, and plan management of PEPs. - Competitive Pressure
As more employers adopt PEPs, others may soon follow suit. In industries where a retirement plan was not a standard offering, it’s increasingly becoming a baseline expectation for attracting and retaining talent.
The Role of the Advisor in the PEP Era
For financial advisors, PEPs open new doors—but also require a shift in mindset. Instead of customizing a plan from the ground up for every client, advisors can help employers evaluate pre-packaged PEP solutions that meet their goals with minimal lift. This consultative role includes:
- Assessing a client’s readiness for a PEP and comparing it to traditional single-employer or other group plans
- Evaluating different Pooled Plan Providers based on fees, services, and governance
- Educating employers on their reduced fiduciary responsibilities and how the PEP model works
- Helping clients onboard efficiently and stay informed on plan performance and participant outcomes
Advisors who embrace PEPs can deepen relationships with small business clients, expand their retirement plan practice, and differentiate themselves in a competitive market.
Looking Ahead: What’s Next for PEPs?
While the growth trajectory for PEPs looks strong, the market is still evolving. A few factors will shape the next phase of development:
- Provider Consolidation: Not all PEPs are created equal. Over time, the market is likely to consolidate around those with strong fiduciary oversight, transparent pricing, robust technology, and participant-focused services.
- Innovation in Plan Design: As providers gain experience, expect to see more innovation around flexible plan features, automatic enrollment enhancements, and financial wellness integration—all within the PEP structure.
- Legislative Momentum: New legislative initiatives such as SECURE 2.0 continue to support plan access and innovation. These efforts may further incentivize PEP participation, especially through increased tax credits for startup plans.
PEPs represent one of the most significant structural changes to retirement plan design in decades. They offer employers a powerful way to reduce fiduciary risk and administrative hassle—while giving employees access to quality retirement benefits. For advisors, plan sponsors, and the retirement industry as a whole, PEPs signal a shift toward a more modern, efficient, and inclusive retirement system.
As the retirement marketplace continues to evolve, those who understand and embrace the potential of PEPs may be well-positioned to lead the next chapter of retirement readiness in America. Contact a Pentegra expert to learn more about how PEPs can help strategically position your practice.