As an employer, you may feel responsible for the financial future of your employees. Offering a retirement plan is a huge part of their overall planning when it comes to finances.
At the same time, retirement plan administration can also be taxing and time-consuming for your leaders and human resources department. What if this is something you no longer have to worry about?
Here are a few reasons that the Pooled Employer Plan, or PEP, could be a good fit if you’re feeling that strain.
1. Eliminates Your 5500 Audit Duties
As your company’s retirement plan grows, you may be spending more time and money each year managing the annual 5500 audit. Has your CPA or TPA recently asked for more detailed payroll records or documentation? Has the cost of your audit continued to rise over the past four years?
Account balances, which also include the accounts of terminated employees, can trigger a mandatory independent CPA audit as a “large plan” filer. These audits are time-consuming, costly (often running between $10,000 and $20,000 per year), and can increase your visibility with the IRS and DOL.
At Accel Wealth Management, part of our advisory services includes helping you clean up terminated accounts for this reason. We don’t want you to get pushed into an unexpected audit!
In a PEP, there is only one 5500 audit for the entire plan. The Pooled Plan Provider (PPP) is responsible for the completion and filing of the 5500 and additional audit requirements.
2. Improves Plan Compliance and Reporting
Payroll integration is the cornerstone for plan compliance. With a PEP, you only need to supply accurate employee census data, such as hire dates, compensation, hours, and termination dates, to your PPP. You create efficiencies by no longer having to track eligibility, deferral changes, and notice disclosure requirements. At the end of the year, you’ll have cleaner data for your nondiscrimination testing, giving your HR team time back.
The PPP takes the heavy lifting off each adopting employer in a PEP. It streamlines your administrative workload while keeping compliance on point.
3. Reduces Personal and Business Liability
With a single employer plan (SEP), your fiduciary responsibilities are heightened for both yourself and the business. Any slip-ups in administration can expose you, your executives, and the business to costly corrections and penalties. For instance, if you miss offering notices to eligible employees in a SEP, the business will have to make up for those missed contributions, market growth, and any employer match requirement.
PEPs shift most of those fiduciary and compliance risks to the PPP. Your personal liability, for things like IRS fines, audit penalties, or ERISA violations, is greatly reduced and potentially eliminated.
As you can see, a PEP is a modern 401(k) solution designed for businesses like yours. While the structure is relatively new in name, it’s based on the longstanding framework of Multiple Employer Plans (MEPs), which have delivered similar benefits for decades. A PEP allows you to provide a high-quality, customizable retirement benefit while offloading the responsibilities you have as a plan fiduciary. If you’re hoping to significantly reduce your administrative workload and review your retirement plan design, let’s connect!