A New Retirement Plan Type: Why PEPs are Growing So Fast

by Prof. Robert Bloink and Prof. William H. Byrnes

Pooled employer plans, or PEPs, are a fast-growing type of retirement plan first introduced by the original SECURE Act as an option effective January 1, 2021. In the most general terms, a PEP is a type of multiple-employer plan (MEP) that meets certain additional requirements to avoid the commonality of interest requirement and one bad apple rule. While the concept seems simple, PEPs can vary significantly in terms of fees, options and flexibility. While PEPs are relatively new in the United States, if global markets are any indication, PEP assets are likely to continue to grow significantly as the idea gains traction with employers looking to reduce administrative burden and limit fiduciary liability. Whether the employer is transferring existing 401(k) assets to a PEP or joining the PEP as their first retirement plan offering, it’s critical to understand the terms of any given PEP before deciding to participate.

PEPs: The Basics