Pooled Employer Plans (PEPs) are a key provision of the Setting Every Community Up for Retirement Enhancement (SECURE) Act enacted in 2019 and they took effect in 2021. A PEP allows employers of any size to pool their retirement plans into a single 401(k) plan. While member employers participate in a single pooled plan, each employer can choose from flexible options to tailor key design elements to meet its unique needs. So, why would a plan sponsor want to make a change?

From Orenduff & Associates by Nick Orenduff, CFP®:

Here are some key considerations:

  • How much are you paying for your current retirement plan?
  • What are your administrative responsibilities to the plan and your employees?
  • Are you assuming liability and if so, what kind?
  • Are you prepared if you were to be audited?
  • Are your employees receiving plan education?
  • Are the plan investments performing as well or better than comparable plans?
  • Are your getting tax credits for your plan?
  • Does your plan attract and maintain key employees?

By pooling assets into a single larger plan, employers and employees benefit from economies of scale, more efficient and diversified investments, as well as reduced administrative burdens and fiduciary risks. Also, a tax credit of up to $15,000 may be available for new plans! By utilizing a PEP, you can spend less time managing a 401k plan and more time focusing on your business. One of the most unique features of the new PEP is the variety of plan fiduciary services it provides you. These valuable services help relieve your plan administration and investment burdens and ensure that everything we do is always in the best interest of your plan. Complete 3(38) and 3(16) fiduciary services are available.

These services include:

  • The selection, monitoring, and reporting of the plan’s core investment options.
  • Designation of the plan’s default investment option (QDIA).
  • Professional portfolio management services
  • Ongoing plan administration and reporting

Ok, sounds interesting, so what are the steps for migrating from a Traditional 401k to a PEP?

  1. Design the plan according to the business’s requirements. Can utilize best practices for safe harbor, auto-enrollment, automatic savings increases (opt-out), investment options, eligibility requirements, employer contributions, vesting requirements, participant loans, and plan distributions.
  2. Set the course. Welcome meeting. Notify the current provider.
  3. Complete the paperwork. Notify participants, sign a service agreement and plan documents.
  4. Prepare for administration. Training call, PEP site live, Plan set-up.
  5. Finalize implementation. Review payroll upload process, review web features and report.
  6. GO LIVE WITH THE PLAN! Welcome notice to participants, participant enrollment materials, blackout period – assets transferred to new PEP.
  7. Monitor the program. Client service manager check-ins, review reporting, participant education, and advice meetings.

Due to the SECURE act, it is a good time to review your 401k and see if you can improve it with a PEP. Or, if you have not set up a plan because it was too burdensome to do so, give PEPs a good look. You could be pleasantly surprised with the ease of use and effectiveness of the new arrangement.

Orenduff & Associates, A PlanMember Financial Center, is an InUnison member with 45 years of serving Richmond, VA area residents. If you have questions or would like to discuss your situation, please contact Nick Orenduff at nick@orenduff.com or (804) 673-6633.

Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation, a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Ave, Carpinteria, CA 93013, (800) 874-6910. Orenduff & Associates and PlanMember Securities Corporation are independently owned and operated. PlanMember is not responsible or liable for ancillary products or services offered by Orenduff & Associates or this representative.

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