PEPs’ Predicted Growth

Art by Katherine Streeter

Much has been said so far about the importance of the nascent pooled employer plan (PEP) market. Recordkeepers, investment managers, third-party administrators (TPAs) and retirement plan advisers and consultants alike are all expected to take different roles in PEPs: as sponsors, administrators, registered pooled plan providers (PPPs) or fiduciaries.

Yet, industry experts and recordkeeping executives say they have heard few inquiries from advisers about PEPs thus far. Nonetheless, industry experts expect that the option will have a big impact on the retirement planning industry.

Aon Retirement Solutions worked for a number of years with elected and regulatory officials to help shape the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the introduction of PEPs, says Rick Jones, a partner in the firm. Aon launched its first PEP in January.

“Beyond Aon, we see increasing interest and buzz on PEPs in the retirement plan and financial services industries,” he says. “The 401(k) and PEP landscape will change dramatically in the coming years, and we anticipate that advisers will become increasingly supportive of PEPs as they better understand the associated cost savings opportunities, risk mitigation and day-to-day work efficiencies.”

Nasrin Mazooji, vice president of compliance and regulatory affairs at Ubiquity Retirement + Savings, says she is hopeful that, as PEPs grow, plan compliance failures will decrease, which would be a positive for sponsors and advisers alike. “Many operational components that are monitored by plan sponsors today will be delegated to 3(16) fiduciaries and PPPs that are likely competent professionals with years of experience in identifying and preventing possible plan failures.”

As to how retirement plan advisers can educate themselves about PEPs, Ari Sonneberg, chief marketing officer and a partner in The Wagner Law Group, says his practice has been issuing informative newsletters, “which have garnered enormous interest, as well as [providing] webinars, which have also featured members of our firm.”

However, pointing to some earlier adviser sentiments about the plans, Sonneberg says, “I think there are mixed feelings among advisers when it comes to PEPs, and many are still on the fence. On the one hand, I think many advisers are excited about the prospect of being in a position to assist clients by helping them evaluate and select a PEP to help lower the costs of sponsoring a retirement plan and to offload and simplify some administrative responsibilities. At the same time, many advisers are concerned about the inherent loss of flexibility, as it applies to plan features and plan investment selection, which comes with the transition from a standalone 401(k) plan to a PEP.”

Still, Sonneberg says, he thinks plan advisers who are conscientious and aware of their plan sponsors’ struggles with plan costs and administration will eventually recommend those clients switch to a PEP. In fact, the expanded use of PEPs can serve as a boon for advisers’ businesses, he says, as some may offer their own PEP. PEPs may also allow registered investment advisers (RIAs) to manage more plan assets, he says.