New England Biz Law Update
The Department of Labor (DOL) has unveiled its regulatory agenda for 2023. Among its priorities is exploring whether additional regulatory guidance is necessary to manage and boost participation in pooled employer plans (PEPs).
PEPs are a type of retirement savings plan established under the Setting Every Community Up for Retirement (SECURE) Act of 2019 to encourage more businesses to set up and sponsor workplace 401(k) plans.
PEPs allow groups of employers to participate in a single retirement plan, sharing the administrative and fiduciary responsibilities that come with offering a retirement plan to employees.
PEPs are intended to make it easier and more affordable for small businesses to provide retirement benefits to their employees, thereby helping more Americans save for their retirement. In 2022, Congress expanded the program with the passage of SECURE 2.0, giving 403(b) nonprofits access to PEPs.
Plan providers and employers alike have expressed concerns about the current PEP environment. They report lingering questions regarding management, fiduciary obligations, audit requirements, and potential legal pitfalls.
For example, PEPs were designed to reduce the fiduciary burden for companies that want to offer retirement plans. But just how much responsibility do employers retain in vetting and monitoring a PEP provider? Can plan providers offer a PEP and hire themselves as a service provider for that plan without a conflict of interest?
Currently about 100 companies have registered to offer PEPs. Analysts suggest that number should be much higher, but too many unknowns are limiting participation.
