Why Employers Are Choosing PEPs

Pooled employer plans were once thought to be primarily for small businesses seeking access to retirement plans, but advisers say their appeal has broadened as employers seek to reduce administrative burdens and outsource fiduciary responsibilities.

“An adviser should be exposing virtually all of their clients to this structure,” says Jeff Belton, a financial consultant at intellicents.

The 2026 PLANSPONSOR Recordkeeping Survey, published by PLANADVISER’s sister publication, found a 44.8% increase from last year in 401(k) or 403(b) PEPs combined, among responding employers. As employers increasingly evaluate whether a pooled employer plan makes sense for their organizations, advisers say they should consider whether outsourcing plan administration and fiduciary oversight is worth giving up customization and control.

While many sponsors say that it is, advisers caution that moving into a PEP requires careful planning, particularly when winding down an existing standalone plan.

Why Clients Make the Move

The decision to transition into a PEP often comes from frustration over the growing complexity of retirement plan administration. While audit costs vary based on plan size and other factors, accounting firm Walters & Associates reported last year that an employer generally pays between $8,000 and $13,000.

“The audits have become very cumbersome, more expensive, more time-consuming and it’s an annual practice that most clients just dread,” Belton says.

Tom Krusic, a financial consultant at intellicents, says larger employer plans can save resources through joining a PEP.

“If you’re a larger employer that has an audit, that typically isn’t something you pay for that you see a lot of value ,” Krusic says. “So let’s get rid of that for the employer and let’s put it on the PEP provider.”

Beyond audit relief, advisers point to economies of scale, outsourced fiduciary responsibilities and reduced administrative demands as key drivers of adoption.

Brody Geist, senior vice president and head of PEPs at The Standard, says many employers that adopt PEPs have human resources teams that are already stretched thin.

“It seems to be plans of all sizes [that] have better things to do, and/or their HR teams are just overworked and understaffed,” Geist says.

Employers with strong risk-aversion also find the structure attractive because many fiduciary responsibilities are shifted to professional plan providers.

Don’t Forget Compliance

Despite employer concerns that a move to a PEP will be disruptive, advisers say the transition process often resembles a traditional plan conversion.

“It doesn’t look much different from a single employer plan to a single employer plan conversion at all,” Geist says.

The similarities, however, can mask a handful of critical tasks that advisers say must not be overlooked. A key difference when moving into a PEP is that sponsors must properly unwind their existing plan.

“They have to understand that there is going to be a plan termination and a merger,” Krusic says. “There’s going to be a final [Form] 5500.”

Krusic says advisers who focus only on moving assets while overlooking the remaining obligations tied to the old plan, such as compliance, can create problems for clients down the road.

“If an adviser is just saying, ‘Hey, let’s move you into the PEP,’ and they’re not paying attention, a year later the client’s like, ‘I just got this letter from the [Department of Labor] saying I didn’t file my 5500,’” Krusic says.

Geist says communication with outgoing service providers and auditors is critical.

“It’s really important that the outgoing provider is aware that a final 5500 needs to be prepared,” he says.

Depending on the timing of the conversion, advisers also note that sponsors may still need to complete audit work and other compliance requirements tied to their former plan, even after entering the PEP.

Plan Design Considerations

While advisers say most employers can retain key plan features after joining a PEP, sponsors should evaluate whether their existing design will fit within the PEP’s framework and limitations. ccording to Belton, many plans have a “rigidity,” and while some are more flexible than others, it will be important for clients to understand what investments should be adjusted and how to educate employees on the differences.

As part of the transition process, providers typically conduct plan design reviews to determine whether important features can be accommodated within the PEP document.

“In rare circumstances where there’s really special or complex plan designs, maybe they’re not a good solution for the PEP anyway,” says Kevin Price, financial adviser at Insight Financial Solutions, a Global Retirement Partners member firm.

Where PEPs Go from Here

As PEP adoption continues to grow, advisers do not expect standalone plans to disappear entirely.

“PEPs are certainly here to stay, and they’re a big part of our future and of the industry’s future. They are not the [sole] future, they’re just part of it,” says Geist. “There is always going to be a place and time for single employer plans.”

Still, advisers say the momentum behind PEPs remains strong. Krusic estimates that over the next five years, of the advisory business will be made up of PEPs, whereas he sees colleagues projecting a 50/50 scale of PEPs versus singular employer plans. According to Krusic, PEPs will provide advisers with the ability to scale their employer reach significantly, with the opportunity to work with 200,000 employees at a time.

In addition to increased participant engagement, PEPs also will give room for employers to customize their educational programs to cover topics beside retirement planning.

“I think that we’ll probably continue to see a lot of really great custom participant education around not just retirement planning, but also financial planning and leveraging the PEP space, to be able to give that to employees,” Krusic says.