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What You and Your Clients Need to Know About PEPs

For clients looking for an efficient, cost-effective recordkeeping solution, Pooled Employer Plans, or PEPs, are a compelling option. 

And if you’re not talking to your clients about PEP options, another advisor probably is, says Ted Schmelzle, second vice president for retirement plan services at The Standard.

Ted gives his top tips in a recent article in BenefitsPRO.

Ted Schmelzle
Ted Schmelzle

What Employers Need to Know

Here are three things employers should think about before joining a PEP:

1. Employer fiduciary decisions exist in all plan structures
Let’s say an employer is considering joining a PEP to shift their fiduciary responsibilities. An employer can’t completely divorce itself from the fiduciary role. Even with a PEP, the employer still has some fiduciary decisions to make.

For example, selecting a Pooled Plan Provider, or PPP, based on the parameters, costs and everything else associated with the PEP is a fiduciary decision. The ongoing decision to stay in the PEP is also a fiduciary decision the employer must make.

2. Cost vs. services provided
In a hypercompetitive market, PEPs can be a cost-effective solution. Each PPP provides different benefit options in a PEP. Employers should find out what they’re gaining or losing by switching from the traditional model.

3. How much control does the employer want?
By entering a PEP, employers reduce their fiduciary responsibilities. But they’re also transferring some of their control over to the PPP. If the employer requires an intricate or complicated plan design, then a PEP may not be the solution for them.

What Advisors Need to Know

Here are three factors for advisors to consider when talking with clients about PEPs:

1. Understand your clients’ needs
Learn the needs of your clients and how to design a PEP. Not all PEPs or PEP providers are the same. Here are some examples of PEP design features:

  • Some require proprietary investment options.
  • PEPs can seek to limit plan design options to reduce cost.
  • Some PEPs act as a mechanism to monetize the participant.
  • They can separate recordkeeping functions from the PPP because of conflicts of interest.

Some focus on maximum plan design flexibility, with administrative and fiduciary outsourcing done at a fair price.

2. Know the advantages and disadvantages of PEPs vs. the traditional model
Be prepared to articulate the advantages and disadvantages of a particular PEP. PEPs have legally been in the marketplace since Jan. 1, 2021. We’ll soon start seeing multiyear data and others will begin to sell PEPs. Clients will want to know more so they can make an informed decision.

3. Different employers will have different needs
PEPs will increasingly be top of mind for employers — no matter their size. An employer’s orientation toward plan design, cost structure, and administrative and fiduciary risk transfer are a few things to be aware of.


Read the Power of Pooled Employer Plans for more details.

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