3764 / What is a “Pooled Employer Plan” (PEP)?
Under the SECURE Act, even unrelated employers that do not operate in the same industry or in the same geographical location (or otherwise) can, beginning after December 31, 2019, join together in what may be best described as an “open MEP.” This means that the PEP is really a MEP meeting MEP requirements. Except, a PEP requires no concrete nexus of industry or geography, or other “commonality” involving participating employers in the PEP. About all that PEP employers need to have in common is a “Pooled Employer Provider” (PPP). For ERISA purposes, a PEP is treated as single plan, which allows for the filing of a single 5500. The PEP filing does require: |
- a list of the participating employees;
- a good faith estimate of the contribution percentages and account balances tied to each employer; and
- identifying information.
Importantly, a PEP also only requires a single ERISA bond equal to 10 percent of the funds handled, but not to exceed $1,000,000.
The PEP must be administered by a pooled plan provider (PPP), which is likely to be a financial services firm.1 The PPP must be responsible for all administrative duties and be named by the plan as the named fiduciary and as the ERISA Section 3(16) plan administrator. It must also register with the Treasury Secretary and DOL as such.2 It must also make certain all parties who will handle plan assets are properly bonded.
Use of the pooled plan provider to act as both plan administrator and a fiduciary with respect to the plan is intended to ease both the administrative burden and fear of fiduciary liability for small business owners. However, each employer, participating in a plan with a PPP, will be treated as plan sponsor with respect to the portion of the plan attributable to employees and beneficiaries of that employer.3