Aon PEP Hits $2B in Plan Assets

The pooled employer plan was launched in 2021 and has doubled in assets in the past year.

Aon announced Tuesday that its pooled employer plan, Aon PEP, has reached a milestone of $2 billion in 401(k) assets under administration and commitments since its inception in 2021. 

Over the last year, assets in the PEP for which Aon serves as the pooled plan provider have doubled, as it reached $1 billion in assets in October 2022 

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Aon PEP includes more than 70 employers providing 401(k) benefits to more than 50,000 employees, according to a press release. Aon reported that participating employers come from a variety of industries, ranging from biotech and life sciences to manufacturing, services, consumer products, energy, technology and transportation.  

“Participants are benefiting from a higher performing, more efficient 401(k) program, with employees able to accumulate up to 11% more retirement savings during their career due to lower fees,” said Rick Jones, an Aon senior partner and head of its wealth solutions division, in the release. “The advantages of switching to a pooled employer planpotentially half the cost, reduced time commitment from corporate staff, improved governance and high-quality retirement planning optionshave become substantial for employers and their employees. We expect more than half of U.S. employers to merge their traditional 401(k)s into pooled employer plans by 2030.” 

According to data from BrightScope and current Aon PEP costs, “all-in” participant fees can amount to less than half of those paid in traditional 401(k)s. Aon argued that the pooled plan structure helps lower plan costs, including recordkeeping and investment management fees. In addition, the PEP provides beneficiaries easy access to investment tools and education services to help them prepare for retirement, according to Aon. 

PEPs also allow employers to reduce their fiduciary liability by sharing it with other employers in the plan and to reduce the resources needed for plan management, compliance and governance. The pooled plan provider is the named fiduciary of a PEP, the plan’s administrator. An employer enrolling in a PEP still has the duty to select and monitor the PEP and the PPP.  

“The Aon PEP offers the chance to advance retirement security for workers and build a more resilient workforce across the U.S.,” stated Byron Beebe, an Aon senior partner and its global chief commercial officer of wealth solutions. “It provides efficiency and scale while maintaining individual employer autonomy to define matching and other contribution levels, vesting rules and other key plan design features.” 

Can a Plan Sponsor Limit Hardship Distributions?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

Q: Our 403(b) plan currently allows for hardship distributions, but the number of such distributions has been on the uptick in recent years. We don’t wish to eliminate hardship distributions, but is there any way we can restrict their availability?

Kimberly Boberg, Taylor Costanzo, Kelly Geloneck and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

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A: Indeed, there are a number of ways you can restrict hardship distributions. One popular way is by limiting the number that may be taken by any plan participant in a given year or over the participant’s entire length of participation in the plan.

Another popular method is to require that a participant exhaust all loan availability under the plan prior to requesting a hardship distribution. The SECURE 2.0 Act of 2022 clarified that distributions from a 403(b) plan are not treated as failing to be made upon hardship solely because the employee does not take available loans, but a plan can still require that all available loans be taken prior to a hardship distribution being issued.

Before implementing any restrictions, though, you should a) discuss with your recordkeeper or third-party administrator to confirm that any new restrictions can be properly administered, and b) examine the reasons for such distributions to determine if another remedy might exist (e.g., by adding an emergency savings account as an employee benefit, either inside or outside of the retirement plan).

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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