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Data and Research December 17, 2024
Pooled Employer Plan Assets Reach $10B, Cerulli Reports
PEPs are gaining traction among 401(k) sponsors across different plan sizes.
Reported by Natalie Lin
The pooled employer plan market has surpassed $10 billion in assets, according to Cerulli Associates, with more than 24,000 employers participating.
The PEP market was created with the passage of the Setting Every Community Up for Retirement Enhancement Act of 2019. The COVID-19 pandemic hit soon after, potentially stalling the market, but the milestone signals steady adoption since, as businesses seek to simplify retirement plan management and reduce costs.
According to Cerulli Associates’ latest analysis and plan sponsor surveying, the primary motivators for sponsors to join PEPs vary by company size. For smaller employers, 30% cited lower administrative costs as the top factor, followed by the simplification of plan administration and compliance at 23%.
Midsize plan sponsors shared similar priorities, with 40% emphasizing reduced administrative costs and 24% focusing on streamlining investment selection and monitoring. Meanwhile, large plan sponsors ranked simplified administration and compliance as their top priority (30%), followed closely by cost reduction (27%).
While PEPs were originally conceived to help close the retirement plan coverage gap that often left smaller employers behind, the findings suggest their advantages also resonate with midsize businesses looking to offload administrative and fiduciary burdens, Cerulli stated.
Meanwhile, the analysis highlighted that outsourcing fiduciary responsibility was identified as the least influential of five key factors when plan sponsors of all plan sizes consider PEPs.
Decisionmaking factors | Small plan sponsors (<$25M) | Midsize plan sponsors ($25M – $250M) | Large plan sponsors (≥$250M) | All plan sponsors |
Lowering plan administrative costs (e.g., recordkeeping fees) | 30% | 40% | 27% | 34% |
Simplification of plan administration and compliance | 23% | 21% | 30% | 24% |
Simplification of investment selection and monitoring | 16% | 24% | 16% | 20% |
Lowering investment costs (e.g., access to institutional share classes) | 16% | 9% | 14% | 12% |
Outsourcing fiduciary responsibility | 14% | 6% | 14% | 10% |
Plan Sponsors and Recordkeepers
However, knowledge gaps persist, particularly among smaller plan sponsors. While three in five plan sponsors (60%) correctly defined a PEP, smaller employers were significantly more likely to indicate unfamiliarity with the structure.
Interest in PEPs remains uneven, with 67% of plan sponsors saying they are not interested in joining a PEP, compared with 19% who expressed some level of interest. Among those hesitant to adopt PEPs, 36% pointed to a preference for maintaining a customized plan design for their employees as a major barrier.
The role of recordkeepers in the PEP ecosystem continues to grow, with 25% of recordkeepers serving as a pooled plan provider and 42% reporting that they currently perform recordkeeping duties for a PEP.
As the market matures, Cerulli’s findings affirmed that PEPs are likely to remain an attractive option for employers looking to reduce costs, streamline plan management and outsource administrative responsibilities.
The sources the report uses to size up the market are the DOL and Cerulli’s proprietary model.
The Standard’s New PEP
The Standard, one of the country’s largest PEP providers, named a new PEP sales director of retirement plans on Monday. Mark Christensen will take the newly created role after positions at Voya, Principal Financial Group and Sallus Retirement.
“Our approach to PEPs continues to attract advisers and employers and we want to invest in this success,” Steve Chappell, The Standard’s vice president of distribution for retirement plan sales, said in a statement. “Mark’s experience will help ensure all the resources at The Standard are available to our advisers as we grow our private label PEP business.”