PEP versus MEP 401k Plans: Why Pooled Employer Plans Are Leading the Way

In the evolving landscape of retirement savings, businesses are continually seeking the most efficient and beneficial ways to offer 401k plans to their employees. Two notable structures that have emerged in this context are the Multiple Employer Plan (MEP) and the more recent Pooled Employer Plan (PEP). While both offer pathways for companies to provide retirement benefits, PEPs are increasingly recognized for their flexibility and inclusivity, making them a favored choice among many employers, including those beyond Professional Employer Organization (PEO) clients to Administrative Services Only (ASO) arrangements.

Understanding MEPs and PEPs

At their core, MEPs and PEPs are frameworks designed to allow multiple employers to participate in a single, collective 401k plan. MEPs have been around longer and require participating employers to have a commonality or shared characteristic, such as membership in the same industry association. This requirement often limits their applicability and flexibility.

PEPs, on the other hand, were introduced more recently, with the passage of the SECURE Act in 2019. They allow a pooled plan provider (PPP) to offer a single retirement plan to multiple unrelated employers. This lack of a commonality requirement significantly broadens the scope of businesses that can participate, making PEPs a more inclusive option.

The Advantages of PEPs

PEPs offer several distinct advantages over their MEP counterparts:

• Broader Accessibility: Without the need for a common nexus among participating employers, PEPs are accessible to a wider range of businesses, from small startups to established companies, across various industries.
• Reduced Administrative Burden: PEPs shift much of the administrative responsibility from the employer to the PPP. This includes tasks related to plan design, compliance, and reporting, which can be particularly advantageous for smaller businesses with limited HR capabilities.
• Cost Efficiency: By pooling assets, PEPs can achieve economies of scale, potentially leading to lower investment fees and administrative costs for participating employers and their employees.
• Mitigated Fiduciary Liability: Employers participating in a PEP transfer much of their fiduciary liability to the PPP, reducing their risk and the need for specialized compliance expertise.

Bluestar - Ameritas 401k: A PEP Solution for All

One standout example of a PEP provider is the Bluestar - Ameritas 401k plan. This partnership exemplifies the flexibility and benefits of PEPs by offering a comprehensive 401k solution not only to PEO clients but also to businesses engaged in ASO arrangements. The Bluestar - Ameritas collaboration demonstrates how PEPs can serve a broad spectrum of employers, from those outsourcing their entire HR functions to those selectively using administrative services.

By offering a PEP, Bluestar - Ameritas opens the door for smaller businesses and those without a common industry connection to access a high-quality, cost-effective retirement plan. Their approach underlines the central advantage of PEPs: inclusivity and flexibility, ensuring that more American workers have the opportunity to save for retirement in a robust and supportive environment.

In Conclusion

As the retirement plan landscape continues to evolve, PEPs stand out as a forward-thinking solution that democratizes access to retirement savings plans. The inherent flexibility reduced administrative burden, and cost efficiency of PEPs make them a compelling choice for businesses of all sizes and types. Moreover, the success of models like the Bluestar - Ameritas 401k plan showcases the practical application of PEPs beyond traditional boundaries, extending benefits to a wider range of employers and their employees.

In the debate between MEPs and PEPs, it's clear that PEPs offer a more inclusive, adaptable, and efficient pathway for retirement savings, heralding a new era in employer-sponsored retirement planning. With their ability to serve a diverse array of businesses, including those in both PEO and ASO arrangements, PEPs are paving the way for a future where more employees can look forward to a secure and prosperous retirement.