First of all….what’s a PEP and why is it important?
A Pooled Employer Plan (PEP) is the latest evolution in the 401(k) marketplace and was made possible through the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. A PEP allows employers to band together and “pool” their retirement plan to create efficiencies and economies of scale and must be governed by a regulated Pooled Plan Provider (PPP). We think PEPs will have a positive impact on the DC industry as they allow for more fiduciary layered protection, involve more small businesses and ultimately set the stage for more Americans to have the opportunity to save for a successful retirement. With nearly 40 million Americans lacking access to a 401(k) and only 48% of small businesses offering any type of retirement plan1, we think PEPs will be a key piece in our national financial wellness puzzle.
To PEP or not to PEP?
Pros of PEPs
- We manage most day-to-day plan processes without distracting the advisor or employer
- No plan document to maintain
- More fiduciary oversight and coverage
- Offer a retirement plan at a lower cost
- Reap the service benefits of larger plans with PEP economies of scale
- For large plans, share audit cost among others, lessening your individual costs
Cons of PEPs
- Employers are covered under the PEP audit
- Limited plan design and investment options
- Less fiduciary liability but still oversee recordkeeper, advisor and 3(38)
Best Fit Prospects
While many types of businesses are good candidates for a PEP, ideal candidates may fall into one or more of the following categories:
- Businesses without a 401(k) plan looking for a simple, cost-competitive option
- Businesses with small, start up plans looking for a low-cost option
- Larger plans looking to avoid high associated costs with a plan audit
- Businesses without a dedicated HR staff
- Businesses looking to reduce risks associated with a 401(k) plan
- Businesses looking to free time spent on 401(k) management for other tasks
Best Fit Advisors
While PEPs may be a key component on the retirement side of an advisor’s business, following are characteristics that make PEP most appealing:
- Advisors looking to simplify and streamline their book of business
- Advisors wanting to make 401(k) a more meaningful part of their practice
- Advisors with a potential distribution network (i.e. associations, chambers of commerce, payroll companies, etc.)
JULY’s PEP Solutions
Our PEP solutions are less expensive than our traditional 401(k) offerings and provide more flexibility than most PEPs in the marketplace today. JULY’s PEPs include:
- Innovative plan design solutions (choose from three packages) with the flexibility to meet many specific plan needs
- Thoughtful technology to support the advisor, plan sponsor and participant
- PPP, 3(16) administrative fiduciary and 3(38) investment fiduciary support included
- Plan sponsors and advisors choose from a select group of professionally managed solutions to best meet participant needs
- Robust payroll integration capabilities add to and back the simple, streamline experience
- Comprehensive notice delivery support
Want to get started with PEPs?
Our sales team can assist you in prospecting for PEP opportunities. As you analyze your current book of retirement and wealth management clients for opportunity, following are selling points for a PEP:
- SIMPLE and SEP conversions as well as alternatives to state-run plans are avenues to consider.
- You can prospect small businesses using the tax credit they receive for setting up a plan as the carrot. We can help!
- Contact our sales team to run a Total Cost Analysis report for specific opportunities to best illustrate where PEP makes the most sense.
Contact your JULY Regional Sales Director to learn more.