Strategic Retirement Partners is launching a new pooled employer plan toward the end of this year with pooled plan provider Alerus Financial, according to the firm and regulatory filings.

The WELLthBUILDER II PEP has commitments for over $50 million of plan assets, with about $50 million more expected by the end of the year, according to SRP Managing Director Phillip Senderowitz. Alerus will be the 3(16) fiduciary for the PEP, with iJoin providing a default adviser-managed account with investments chosen by SRP as the 3(38) investment fiduciary.

The plan sponsors committing to the plan are transitioning over from individual plans and are primarily large enough to need to pay for an annual audit (about 100 or more participants with account balances), Senderowitz notes. The PEP will provide advantages including the pricing benefit of significantly reducing auditing fees along with a reduction in fiduciary liability, but also the more personalized investments and advice via the adviser-managed account, according to the plan adviser.

“For a PEP, I think it’s important because for a default alternative, one of the key components is that you have to consider the demographics of the population of the plan,” he says. “By definition, if you have multiple employers, there is no demographic—we feel that you need to personalize it.”

There will be a 14 basis point fee for assets in the managed account, but SRP will not make anything additional from the setup, Senderowitz says.

“If it was just straight target-date funds we’d make the same,” he says. “This is the solution that we envisioned, and it’s the same benefit to us either way.”

‘Holy Grail’

By the end of the year, SRP also plans to have incorporated TIAA/Nuveen’s Secure Income Account through the managed account to provide a guaranteed retirement income from a deferred fixed annuity. It’s a product that CEO and Managing Partner Jeff Cullen says SRP has been close to for years and has seen success when implementing with a nonprofit plan sponsor client.

Although this is SRP’s second PEP, this style of adviser managed account with retirement income features are elements that Cullen has been wanting to bring to plan sponsor clients for years.

“The holy grail I’ve been trying to get to for a long time for clients is managed accounts with open architecture on algorithms and open architecture on in-plan income at a reasonable price,” he says.

iJoin’s offering, according to Cullen, doesn’t have the issue of providers putting the investments they want into the managed account offerings.

“It’s like we’re going back to the 90s [with recent managed account offerings],” Cullen says. “We don’t want to go backward to where advisers, as fiduciaries, don’t have choices. Advisers want to tailor it to the audience and based on what we know about our clients—having open architecture is incredibly important.”

Steve McCoy, CEO and chief compliance officer of iJoin, says that flexibility is one key advantage his firm is offering the adviser market for managed accounts.

“We provide a lot of modularity and flexibility to forward-thinking firms like SRP,” he says. “They can take our technology and put their imprint on it and use their investment management expertise.”

A second draw, he says, is cost, which he says is “low enough that it compares favorably to a single-factor, actively managed target date series.”

Mark Alley, national market president for Alerus, says the firm has used iJoin in the past and has been working with SRP advisers for years as well.

Income Next

Adding a retirement income option to the PEP meets Cullen’s other goal of providing a pension-like experience through a defined contribution plan. 

“When you look at the returns, when you look at the contribution rates, when you look at just how happy the employees are—it’s amazing how much better life is when you have certainty,” Cullen says.

Alerus, which entered the PEP space in 2021 after working in multiple employer plans for over 50 years, believes SRP’s “focus on providing personalized wealth management solutions to participants” makes the firm a “great fit” for the PEP’s structure. National market president Alley also sees more business ahead in the PEP space.

“We believe there is incredible growth potential for PEPs,” he says. “With the increase of state-mandated plans and the growing cost of plan audits, PEPs are already becoming the go-to solution for many plan sponsors because they provide a simple plan solution that also offloads many of the fiduciary responsibilities associated with offering a 401(k) plan.”

SRP launched its first WELLthBUILDER PEP in 2022 with Securian Financial as the pooled plan provider. For that PEP, Securian is the 3(16) fiduciary and SRP provides 3(38) investment management and consulting services.

PEPs, though around since 2019 with the passage of the Setting Every Community Up for Retirement Enhancement Act, are still an emerging offering in the retirement space. In a recently released PIMCO DC consulting study, PEPs saw the largest increase in being a “top strategic DC priority for institutional consultants.”