Lockton Creates PEP Solutions for Small and Large Employers

The launch will be available to clients in the Northeast and extend nationally over the course of several months.

Lockton has launched a practice designed to help employers reduce the risk, effort and expense of sponsoring retirement plan benefits.

Based in the Northeast and co-founded by advisers Tom Clark and Mike Duckett, the new outsourced administrative responsibilities (OAR) practice will make pooled employer plans (PEPs) the first order of business. Lockton will launch a series of PEPs, initially in the Northeast and then nationally, over the next several months.

“Lockton’s philosophy for delivering retirement advice has always been based not only on objectivity, but also maximizing the market’s potential. To do that, we must constantly innovate. OAR was specifically designed to leverage the marketplace inflection point the Setting Every Community Up for Retirement Enhancement [SECURE] Act created. That’s why we’re designing multiple PEP solutions. It’s a very strategic decision to maintain our objectivity and it’s a recognition that clients need more than a one-size-fits-all solution,” says Pam Popp, president of Lockton Retirement Services.

PEPs are often considered small plan solutions, but Lockton has engaged with providers Principal and Transamerica to develop PEPs for the larger market.

“Lockton believes that those who interact most directly with clients are best positioned to drive innovation,” says Bob Connolly, CEO of Lockton’s Northeast series. “That’s why we charged Tom and Mike with gathering marketplace intelligence and partnering with industry leading recordkeepers and asset managers to build a program that will set the standard PEP offerings.”

“The new rules create huge opportunities for retirement plan sponsors,” says Sam Henson, director of legislative affairs for Lockton Retirement Services. “Before, these programs were limited to affiliated organizations. Now any employer can pool their plan’s assets with other employers. The benefits are significant, including streamlined administration, reduced compliance and fiduciary risk, and greater plan negotiation leverage. The biggest advantage for companies dealing with COVID-related business challenges is the opportunity to provide best-in-class retirement benefits and shift the majority of fiduciary responsibilities to industry experts.” 

“Many anticipate that traditional multiple employer plan [MEP] providers will simply retool old, small market offerings with a ‘PEP’ label,” says Duckett. “Our approach begins with solving for our clients’ business needs. We’re leveraging opportunities created by the SECURE Act to enhance plan design flexibility and increase clients’ ability to outsource administrative complexity.”

In addition to outsourcing, PEPs allow employers to benefit from scale. According to Clark, this includes not only the scale of the employers’ combined plan assets, but also the scale of the associated adviser’s book of business.

“Objectivity is so foundational to what we do that, when building our multiple PEP options, we refused to sacrifice flexibility or best-in-class asset management just to achieve better pricing,” Clark says. “Instead, we leveraged Lockton’s negotiating strength. Where others create savings by consolidating assets to achieve $50 million or so of purchasing power, the clients attracted to a Lockton-built PEP can achieve the scale generated by more than $1 billion.”

PEPs are not a single provider offering. They must be constructed through partnerships of several entities including administrators, asset managers and advisers.

“Clients turn to and trust Lockton to help them solve complicated issues on insurance, benefits and retirement. Our specific clients in the Northeast tend to have complicated plan design rules as a result of their contracting requirements, and many have unique needs as it relates to ownership groups, M&A [mergers and acquisitions] and compliance testing. OAR will help our middle market clients to solve these important issues, while also outsourcing their fiduciary and administrative responsibilities and risks,” Connolly says.