Into the Pool

Pooled employer plans continued to gain momentum in 2023. Last fall, Ascensus reached more than $1 billion in PEP assets under administration, and Aon’s PEP assets reached $2 billion. Paychex Inc. reported that the number of its PEP plan sponsors had doubled to 25,000.

However, the older but more restrictive multiple employer plans—MEPs—have not experienced the same growth. Since their member organizations are required to have a common interest or affiliation, MEPs are typically sponsored by trade associations, industry groups or professional employment organizations. According to a January 2024 report from the Center for Retirement Research at Boston College, MEPs represented only 0.6% of total private sector retirement plans and covered roughly 5.7% of active participants.

‘Our Time Can Be Better Focused’

Plan providers cite several reasons for pool arrangements’ growth, including reduced liability, simplified plan administration for employers and potential cost savings versus traditional stand-alone 401(k) plans.

Wendy Reitnauer, director of finance for the nonprofit 1889 Foundation in Johnstown, Pennsylvania, agrees those factors influenced her organization’s selection of a MEP provided by Pittsburgh-based DBR & Co. as its retirement plan provider. The 1889 Foundation received funds from the sale of Conemaugh Health System to Duke LifePoint Healthcare in September 2014 and supports “innovative programs and initiatives that improve and transform the overall health and wellness” of the region that includes Cambria and Somerset counties.

The foundation’s decision to join a MEP was based on “reduced fiduciary liability and administrative support to run the plan effectively,” Reitnauer explains. “As a small office with only four employees, our time can be better focused on mission-related matters than oversight of a retirement plan.”

Reitnauer also cites the MEP’s access to “lower-cost, high-quality institutional funds and the ability to keep existing plan provisions,” she says. “Additionally, [DBR&Co.], as the plan sponsor, co-fiduciary and another company within the MEP, provides top-notch oversight and monitoring of the fund lineup, always looking out for the best interest of all MEP participants.”

Before joining the MEP, the foundation’s management looked at cost and fee structures, relationships with the co-fiduciary/adviser, plan administration, recordkeeping, reporting and filing requirements.

“The evaluation included connecting with plan counsel for any concerns with conversion and reviewing the investment lineup for quality of funds, expense ratios and performance,” Reitnauer says. “Management then presented findings to the finance committee of the board of directors, recommending approval to convert the existing 401(k) plan to the MEP.”

Four employees currently participate in the plan, with assets totaling about $750,000. Reitnauer says the MEP and DBR & Co. have met all the foundation’s expectations.

She also shared additional advice for organizations considering pooled arrangements: “Be sure to do all the due diligence. Run the options past plan counsel, review the investment lineup and all plan fees, ensure a co-fiduciary relationship with the plan sponsor/adviser and that proper recordkeeping and filing requirements are performed.”

‘We Couldn’t Afford a Stand-Alone 401(k)’

Seattle-based Convera Holdings LLC started operations in March 2022 as a spin-off of Western Union’s business solutions unit and is now a leading fintech provider in business-to-business cross-border payments and currency exchange.

“As part of the deal terms [when the company was spun off], we were required to maintain similar benefit plans for the employees, but we knew we couldn’t afford a stand-alone 401(k) that matched the Western Union plan at Schwab,” explains Convera’s chief people officer, Jodi Krause. “We hired a brokerage firm to help us source and evaluate various options, and a PEP seemed like the ideal solution. We interviewed four different PEP plan managers before selecting the Aon plan.”

Krause says Convera’s participation in a PEP with Aon includes 299 participants and a balance of approximately $36 million. The critical factors in the plan comparisons were firms’ reputation, employee plan fees and design flexibility.

“We knew at the time that we would not be able to manage this internally, given our resourcing model,” says Krause. “Aon PEP manages everything for us, including the fiduciary responsibility and management of the plan, and it ensures we are legally compliant.”

Krause adds that the Aon PEP’s design, administration, fees and employee satisfaction have met Convera’s expectations. She encourages other smaller companies that want the benefits of a large-plan design but lack the resources needed to administer their own 401(k) plan to consider PEPs.

“Choosing the right partner for the PEP plan is important,” she notes. “Make sure you choose one who proactively works with clients to ensure complete transparency on data, plan performance, advice, and recommendations on changes and is always looking for your best interest.”