PEPs let unrelated employers share one plan and hand the running of it to a professional, which is useful. Watch the part of the pitch that says your client stops being a fiduciary.
The pitch sells relief, and most of it is real. Join a Pooled Employer Plan and a professional takes over the plan document, the Form 5500, the eligibility tracking, the distributions, and the participant disclosures. Your client signs a participation agreement and stops thinking about the machinery. Two or more unrelated employers share one plan and one 5500. For a 40-person manufacturer whose CFO has struggled with a standalone 401(k) for a decade, that is a real offer.
PEPs became legal on January 1, 2021, under Section 101 of the original SECURE Act. The Act made two structural changes. It eliminated the old commonality requirement, the rule that said employers in a multiple employer plan had to share some nexus like a trade association or a common industry. It also repealed the one bad apple rule, so a single non-compliant employer no longer disqualifies the whole plan for everyone else. Those two changes turned the open MEP from a niche product into something you can offer to any small business.
In a PEP, the administration moves away from the employer. A registered Pooled Plan Provider serves as named fiduciary, plan administrator, and 3(16) operational fiduciary. The PPP runs the day to day. It approves distributions, maintains the document, files the single 5500 covering all adopting employers, and sends out the disclosures nobody at a 40-person company wants to think about. The work that eats a small sponsor's Friday afternoons moves to someone who does it for a living.
That has real value. Small plans cost a lot to administer relative to their size, and the people running them are usually a controller or an office manager doing it on the side. Concentrating that work with a professional who runs it at scale is a reasonable trade, and the market agrees. PEP participation has climbed fast since 2021, the first year the structure was allowed, and new adopters keep showing up.
This is where the marketing gets ahead of the law. You will hear, sometimes from the provider and sometimes from a competing advisor, that a PEP makes your client's fiduciary risk go away. DOL guidance says otherwise: the PEP's own governing documents must require each adopting employer to keep two responsibilities. The first is the prudent selection and ongoing monitoring of the Pooled Plan Provider and any other named fiduciaries. The second is the management of plan assets attributable to its own employees, to the extent that duty has not been delegated.
The first duty, picking the provider and then continuing to watch it, is non-delegable. The employer cannot hand off the choice of whom to delegate to. The employer who joined a PEP to escape fiduciary liability has concentrated that liability into a single, recurring judgment: is this provider still the right one?
For an advisor, that point matters most. A standalone plan spreads fiduciary exposure across dozens of small decisions, the fund lineup, the recordkeeper, the reasonableness of fees, each one defensible on its own. A PEP collapses most of that into one decision the employer still owns. If the provider underperforms, overcharges, or stops investing in its own operation, the employer who never checked carries the consequences.
PEPs are a good structure for some plans and a poor one for others, and the advisor's job is to tell them apart before the sale. A rough cut:
Do the diligence on the provider, because the market is thinner than the brochures suggest. A long list of firms registered with the DOL as Pooled Plan Providers in the early going. Far fewer have filed a 5500 for an operating plan. A provider can file the registration, put up a website, and never run a live plan. The assets also skew to the big players. Registration tells you nothing about scale or staying power.
The advisor's value moves to the one duty the law will not let the employer give away. When the provider handles administration and sets the lineup, the advisor contributes a documented, repeatable process for selecting and monitoring the provider itself. Benchmark the provider's fees against the alternatives. Review service quality on a schedule the committee keeps. Write down what you looked at and why the provider still looks prudent, and put it in the minutes.
That record shows the client has met a non-delegable duty. Whether you build that file in a spreadsheet or in a system of record like PlanSync, the standard is the same. The judgment stays with the advisor and the sponsor, and the work is showing it was done. A PEP can carry most of the administrative weight a small plan was never built to hold. It cannot carry the decision about who runs the plan, and the advisor who says so is the one worth keeping.
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