PLANSPONSOR - October/November 2020 - 4

INDUSTRY ANALYSIS
How Will PEPs Develop?
P
ooled employer plans, aka PEPs, are
one of the most discussed pieces of
the Setting Every Community Up
for Retirement Enhancement (SECURE)
Act. Although PEPs and their cousins,
MEPs-multiple employer plans-have
key differences, some experts see the
interest in MEPs as a reasonable proxy
for forecasting the kind of early interest
that providers could see for PEPs. Data
about the existing multiple employer plan
market was collected as part of the 2020
PLANSPONSOR Recordkeeping Survey,
fielded in May.
MEPs and PEPs are seen as an efficient
way for small employers, by banding
together, to offer a retirement plan. Only
28% of businesses with fewer than 10
employees provide a retirement saving
benefit, according to a study by SCORE,
a nonprofit network of business mentors.
Businesses with more workers were more
apt to have a workplace plan. The study
noted that 51% of businesses with 10
to 24 employees and 63% with 25 to 49
employees offered retirement savings
plans. Business owners cited cost and lack
Number of MEPs, by Asset Size
1,606
1,481
364
68
Source: 2020 PLANSPONSOR Recordkeeping Survey
<$1mm
$1mm - $10mm
>$10mm - $50mm
43
>$50mm - $100mm >$100mm - $200mm
57
>$200 - $1b
of resources to administer the plan as the
leading reasons they did not offer one.
PEPs are similar to " open MEPs " but
... the vast
majority (77%)
(of MEPs) remain
small plans, with
$5 million or less
in assets.
simpler. Under the SECURE Act, neither
needs a " commonality of interests "
among the employers that participate,
as traditional MEPs require. PEPs may
be offered by a pooled plan provider that
may be an adviser or other financial institution,
which will act as the PEP's plan
administrator and fiduciary-providers
that small plans may not have had access
to previously.
Our Recordkeeping Survey collected
data from 24 recordkeepers about
their MEP client base. Those providers
currently operate more than 3,600
MEPs, run on behalf of nearly 30,000
employers, covering 1.4 million participants.
A look at the asset sizes of the
MEPs shows that the vast majority (77%)
remain small plans, with $5 million or
less in assets. Only a fraction of the plans
achieve large or mega plan status, which
may mean that the benefit of the MEP is
mostly in plan administration and not in
cost advantages.
While, for a small business, cost is a
critical factor when it comes to offering a
retirement plan, Richard Rausser, senior
vice president, Pentegra Retirement
Services in White Plains, New York,
says, the decision is also about time and
complexity. " These folks are not retirement
plan experts. They want to run their
business and want to provide a retirement
plan. Even those that offer a plan
are already outsourcing some duties, " he
says. " If they had to do administration on
their own, it would be taking time from
their business. " -PS
4 PLANSPONSOR.COM October - November 2020
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PLANSPONSOR - October/November 2020

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