SIRUS TURKZADEH and MARC LIPSON
Partners
The Lynnvest Group at RBC Wealth Management
The retirement plan industry stands at an inflection point. As regulatory bodies, recordkeepers, and market forces converge, plan sponsors who ignore this momentum risk being left behind. Pooled Employer Plans (PEP) represent not just an alternative, but the future of retirement benefits.
PEP assets have surged from nearly $12 billion in 2023 to an estimated $21 billion by end of 2024, with the number of plans growing from 109 in 2021 to 339 in 2024, according to Cerulli. More than 50,000 employers have already made the switch, and active participants with balances increased 49% year-over year, mainstream acceleration, not experimental adoption.
According to Cerulli, 71% of recordkeepers cite PEPs as a major or moderate strategic priority, with 63% reporting PEP growth will positively impact their business. Twenty percent of plan sponsors conducting recordkeeper reviews are now actively considering PEPs, a figure that continues climbing.
UNDERSTANDING HOW PEPs ARE STRUCTURED
Not all PEPs are created equal. Understanding the key roles within a PEP structure helps plan sponsors evaluate their options. A well-designed PEP brings together three critical functions, each with distinct fiduciary obligations.
• The 3(38) Investment Fiduciary assumes full discretionary authority over investment selection and monitoring. By accepting this fiduciary status in writing, the 3(38) manager shields the plan sponsor from investment-related liability, a significant advantage for employers without dedicated investment expertise.
• The Recordkeeper is the operational backbone of the plan, managing participant accounts, processing contributions and distributions, and delivering participant communications. Scale matters: larger recordkeepers offer more robust technology, broader investment menus, and competitive fee structures. When evaluating a PEP, assess financial stability, service quality, and integration capabilities.
• The Pooled Plan Provider (PPP) is a named fiduciary registered with the Department of Labor, responsible for overall operation and administration of the PEP. As the 3(16) plan administrator, the PPP signs the Form 5500, maintains plan documentation, and bears primary fiduciary responsibility, dramatically reducing the burden on participating employers. Key factors to evaluate include compliance track record, client retention, and experience managing multi-employer arrangements.
THE INDUSTRY CONSENSUS IS CLEAR
Recordkeepers are increasingly focused on the micro and small market segments, with more than half expecting the $125 million plan segment to be a major growth driver. PEPs solve the efficiency equation for both providers and sponsors in these segments.
SECURE Act 2.0 provisions effective in 2025 have intensified compliance burdens, making the fiduciary relief offered by PEPs even more attractive. For plans with 100+ employees facing mandatory audit requirements, cost savings alone can exceed $15,000-30,000 annually, before considering reduced legal exposure and administrative efficiency.
THE TIME TO ACT IS NOW
Industry momentum, regulatory evolution, and institutional commitment have aligned. Employers who wait risk falling behind as competitors leverage PEPs to attract talent, reduce costs, and shed fiduciary liability.
LET’S TALK
If you’re wondering whether a PEP is the right fit for your organization, we’re here to help. As part of RBC Wealth Management’s Institutional Consulting Group, we work with plan sponsors to evaluate retirement plan structures, assess fiduciary responsibilities, and identify solutions that align with your business goals and your employees’ best interests. Reach out to us directly to start the conversation.
The question isn’t whether to consider a PEP, it’s whether you have the right guidance to make that decision with confidence.
Learn more at us.rbcwealthmanagement.com/thelynnvestgroup.
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