In the coming year, plan administrators may be approached to join a new type of pooled 401(k) plan. The SECURE Act established a new type of multiple employer plan called a “pooled employer plan” (PEP). These plans allow unrelated employers to participate in a single, shared 401(k) plan. The U.S. Department of Labor announced in November a final rule establishing registration requirements for pooled plan providers.
“Pooled employer plans will give employers, especially small unrelated employers, a way of offering their employees a workplace retirement savings option with reduced burdens and costs,” said Acting Assistant Secretary of Labor for the Employee Benefits Security Administration Jeanne Klinefelter Wilson. “This final rule lays the groundwork for a sensible registration process so that providers can get pooled plans up and running.”
The SECURE Act allows pooled plan providers to start operating PEPs beginning January 1, 2021.
PEPs may be an attractive option for small unrelated employers to offer retirement benefits at a reduced cost and remove themselves from certain fiduciary responsibilities that come with offering a traditional 401(k) plan. The pooled plan provider does the administrative work and bears the fiduciary risk, including investment selection and monitoring, Form 5500 filings, plan documents, and participant notices, among others. PEPs with fewer than 1,000 participants are exempt from an audit requirement as long as no single employer exceeds 100 participants.
Managing the compliance requirements of your 401(k) plan can be challenging especially in light of changing environment, rules, and regulations from the Department of Labor and IRS. That’s why it’s important to have a clear understanding of the audit requirements, including exceptions, to ensure your plan maintains compliance. If you have questions or need assistance with an upcoming benefit plan audit, Barnes Dennig can help. For additional information please call us at 513-241-8313 or connect with the professionals at Barnes Dennig for more information on PEPs. We look forward to speaking with you soon.