What Are The Pooled Retirement Plans?

Pooled employer plans are a kind of pension plan that meets specific requirements that are maintained to supply benefits to employees of two or more unrelated employers. A pooled employer plan could also be either a professional defined contribution plan under Section 401(a) of the Interior Revenue Code (the “Code”) or contains individual retirement accounts described in Section 408 of the Code. The PPP liable for maintaining pooled employer plans could also be one among the participating employers or maybe an unrelated entity, like an insurer or financial organization that meets specific requirements described below.

Plans that satisfy the pooled employer plans requirements are characterized as open multiple employer plans and are treated as a single plan for purposes of meeting the needs of the employee Retirement Income Security Act (“ERISA”).

On June 18, the U.S. Department of Labor (DOL) published an invitation for information for input on upcoming regulations involving pooled employer plans, which are newly permitted starting in 2021 under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, and other multiple employer plans. Comments are being accepted through July 20, 2020.

This greatly enhances the power of employers (particularly small and medium-sized employers) to keep up retirement programs for his or her employees. Within the past, legal impediments to maintaining “multiple employer plans” for groups of unrelated employers have meant that several small and medium-sized employers were left to struggle with the cost, complexity, and legal exposure related to maintaining a single-employer plan or to forgo having a plan at all. The SECURE Act provides for the creation of a brand new retirement vehicle called a “Pooled Employer Plan” (“PEP”), during which unrelated employers may participate and which is sponsored by a “Pooled Plan Provider” (“PPP”). The PPP will typically be liable for most fiduciary and administrative duties associated with the pooled employer plans, freeing participating employers from the burden of these responsibilities and enabling them to limit their legal exposure for such matters. Additionally, PEPs offer the chance of lower costs than single-employer plans on account of the pooling of assets and attendant economies of scale, also as precise streamlined reporting and disclosure requirements.

Pooled employer plans (PEPs) allow unrelated employers that do not share a conventional industry or location to participate in a single shared 401(k) plan so that they can take advantage of their collective purchasing power to negotiate lower fees and better services. A pooled plan provider, such as a financial or professional services firm, acts as the plan administrator and is a named plan fiduciary. Decisions about pooled employer plan investment options could also be made by the pooled plan provider, participating employers, or another designated third party, like an investment advisory firm.

Before the SECURE Act, the concept for pooled employer plans of unrelated employers was referred to as an “open MEP” and “closed MEP” described a plan limited to employers in the same industry or location.

Being a part of a shared plan can reduce compliance costs, advocates contend. Nevertheless, there’s vigorous debate over the level of savings employers participating in shared plans will achieve