As an HR leader with a small team or a CFO who wears many hats, managing a 401(k) plan can feel like just another daunting task on your to-do list. That’s where a Pooled Employer Plan (PEP) comes in, offering a streamlined retirement plan experience for both you and your employees. However, you might be skeptical. Despite their growing popularity, misconceptions about PEPs still linger, leaving many business owners hesitant to explore this option. Let’s set the record straight by debunking some of the most common myths about PEPs!
Myth #1: "PEPs Are Too New to Be Trusted."
Reality: PEPs are a form of Multiple Employer Plans that have been around for nearly 75 years. The Secure Act of 2019 formalized and expanded their use with the creation of the current PEP solution. Many providers offering PEPs have decades of experience in retirement plan administration.
Myth #2: PEPs Are Restrictive in Plan Design (Eligibility, Employer Match, Company Contributions, Roth, etc.)
Fact: A frequent concern is that PEPs impose rigid rules on employer contributions, eligibility, and Roth options. Plan design flexibility actually depends on the Pooled Plan Provider (PPP), recordkeeper, and investment manager. The plan design is only as good as the recordkeeper can keep track of. That's why we've chosen to work with Finway Group and Empower as carefully selected strategic partners to offer a lineup that balances performance, cost, and flexibility!
Myth #3: Investment Options are Restricted and Limited in a PEP.
Fact: This can be the case, but that's why we created the Accelerated Retirement Advantage PEP! Our specialty in this space is investment management. We're committed to monitoring your options and performance to make sure they are good quality. Most PEPs do actually offer a carefully curated selection of mutual funds, sometimes upward of 25 options, to meet diverse investment needs. If your current program offers further investment flexibility through brokerage, certain PEP programs may offer this additional option.
Myth #4: If One Business Involved in a PEP Fails, They All Do.
Fact: A common misconception is that if one company in a PEP goes under, it drags the other businesses down with it. While multiple businesses participate in the same PEP, each employer is financially independent. In reality, each employer in the plan operates within its own financial "bubble." Imagine that the PEP is a large umbrella, but each business's assets are separate and protected. If one business struggles, the other participants remain unaffected. That specific adopting employer is the only one hit by the hurdles.
Myth #5: PEPs Are More Prone to Fraudulent Distributions.
Fact: Retirement plan fraud is a concern for any 401(k), not just PEPs. However, PEPs actually offer stronger protection because they are overseen by professional fiduciaries, recordkeepers, and the pooled plan provider (PPP). It takes the liability off you. We've got your back!
PEPs aren’t just another alternative—they’re a powerful solution for businesses looking to simplify their retirement plans. Whether it’s plan design, investment options, or fiduciary responsibilities, the truth is clear: PEPs are designed to work for you, not against you.
If you’ve been on the fence about offering a PEP, it’s time to separate fact from fiction. With the right provider, you can provide employees with a robust retirement plan without adding extra stress to your plate.
Ready to explore if a PEP is the right solution for your company? Let’s talk!