Pooled employer plans, which allow organizations of any type to form group plans, are still in their nascency, having only been made available in 2021. Their predecessors, multiple employer plans, which group businesses that share a common industry or interest, have been around for decades.

Due to that history, the MEP market is both larger and easier to track using historic data. As of 2022, the most recent year available from ISS Market Intelligence, there were 4,445 MEP plans holding $392 billion in assets. While that count was down from 2021, it dwarfs the market from 2021 of $271 billion in assets. ISS MI, like PLANADVISER, is owned by ISS STOXX.

The full PEP market, meanwhile, is harder to measure, with data companies not yet releasing full market assets or number of adopting employers. Provider Aon has reported more than $2 billion in PEP assets and commitments since its inception in 2021, and The Standard and Ascensus have each reported more than $1 billion. Meanwhile, many retirement plan advisers and aggregators have PEPs in the marketplace, presumably adding employers via their network of advisers working with new or existing plan sponsors.

With considerable focus on PEPs, is it possible the pooled vehicle is taking market share from MEPs due to the ability to add businesses of any type or background? Ginger Brennan, senior vice president and head of American Bar Association retirement funds and multiple employer solutions at Voya Financial, does not think so.

“I don’t see any cannibalization happening,” says Brennan, who oversees both MEPs and PEPs for Voya. “MEPs are still working out for many associations and trade groups.”

Oftentimes, a MEP is offered by an organization in exchange for fees or dues from the participating businesses. But as these employers seek efficiencies in both plan administration and costs—particularly when they are running with slim human resources teams—MEPs continue to be useful.

That said, Brennan has seen the need for educating plan sponsors about the differences between MEPs and PEPs and which is best for a given situation. Earlier this year, Voya created a dedicated team to work with and answer questions from plan advisers and intermediaries about pooled plan options.

“We do see interest from plan sponsors stemming from things like the state mandates or when a merger happens, but generally, [the pooled plans] don’t sell themselves,” Brennan says. “The education process is really, really important.”

Voya does not break down its pooled assets between MEPs and PEPs, but Brennan says it has seen roughly 15% growth and recently reached $100 billion in combined assets. The firm does not break out how many of those assets are in PEPs.

White Label Option

Shane Hanson, founder, CEO and president of Freedom Fiduciaries LLC, agrees that there is an educational opportunity to support MEPs and PEPs. But he said PEPs can have a long-term advantage in the marketplace—in part because they are also viable options for associations and trade groups through white labelling.

“What many people don’t know is that a PEP can be white labelled for an association,” Hanson says. “With that setup, they can still receive a referral fee from the adopting firms for their marketing and administrative efforts while benefiting from the scale of a PEP without assuming the liability of a MEP.”

Hanson says the biggest hurdle to those setups is outreach and education—many plan advisers, let alone the plan sponsors, are not fully aware of the options and advantages of the PEP market.

Freedom Fiduciaries, which has a PEP with Empower as the recordkeeper and Finway Group as the pooled plan provider, has been in discussion with associations about joining, Hanson says. Meanwhile, the firm has been booking both large and small plans into the PEP throughout 2024, with more coming online.

Banding Together

Sean Jordan, head of small and midsize market segments at Principal, says his firm is seeing growth in both MEPs and PEPs, noting that MEPs continue to be popular for specific industry groups, such as small manufacturers, dental practices and law firms.

“Smaller employers often don‘t have a lawyer on staff and don’t have their own ERISA adviser,” he says. “One of the great benefits of a PEP or MEP is the economy of scale: … You can have 1,000 smaller employers who are all getting access to the products and services of a much larger entity.”

Principal has three PEPs in the marketplace currently, with a combined $1.7 billion in assets, according to the firm. While Jordan says small startup plans are a big part of the growth in its PEP offerings, there are also larger firms—with assets worth between $50 million and $100 million—that have transferred into the offerings in part for “ease of administration.”

Many of those larger plans, Jordan says, have come from intermediary relationships such as plan advisers. Those types of knowledgeable intermediaries, he says, will not only be key to driving PEP growth, but plan startups overall.

“One of the biggest hurdles right now for both intermediaries and those smaller employers is the lack of understanding around a lot of what SECURE 2.0 provided by way of tax incentives,” Jordan says, noting that many advisers do not know that a MEP or PEP will qualify for those incentives.

Meanwhile, a pooled plan may not be right for all firms, he says. Some may opt for the many individual plan options in the marketplace that also offer simplicity and relatively low-cost administration. But no matter the type of plan, much of where the market heads will depend on where advisers and consultants lead it.

“It’s really important to cultivate and manage intermediary relationships,” Jordan says. “Those are the people that will ultimately drive the market and educate the plan sponsors.”