Pooled employer plans have earned their reputation as a practical solution for smaller employers. But as adoption grows, larger plan sponsors have started asking whether a PEP might work for them too. The answer, according to one retirement plan consultant, is complicated.
A recent Employee Benefit News commentary by Jay Schmitt, ASA, a principal at Strategic Benefits Advisors, walks through what larger employers stand to gain—and give up—by joining a PEP.
PEPs were created under the SECURE Act of 2019 to solve problems of scale. Most of what makes offering a retirement plan difficult for smaller employers—compliance, administration, access to institutional pricing—gets easier when multiple employers pool together under a single plan run by a professional pooled plan provider. More than 50,000 employers have now adopted a PEP, according to a 2025 Cerulli study, with about $21 billion in assets at the end of 2024.
For larger employers, the draw isn’t usually administrative convenience. Most already rely on TPAs, auditors, ERISA counsel, recordkeepers, and investment advisers to handle much of the operational burden. The bigger appeal is fiduciary protection. With ERISA litigation climbing, a PPP stepping in as named fiduciary can look like a structural way to reduce exposure.
That perception isn’t entirely wrong—but it’s not the whole picture either.
Inside a PEP, employers retain choice over eligibility, matching contributions, vesting schedules, and auto-enrollment. But those choices exist within the structure established by the PPP, not within a fully independent plan. Investment control is constrained too. Fund lineups are standardized across adopting employers, and decisions about replacing underperformers belong to the PPP. An employer that has spent years building its own investment governance process can’t simply carry that into the pool.
Mr. Schmitt notes that loss of governance tends to surprise employers the most. Plan amendments, fund changes, and operational decisions run through the PPP across all adopting employers—regardless of size.
For employers primarily concerned with fiduciary risk, a PEP isn’t the only option. A 3(38) investment adviser can assume discretionary responsibility over plan investments without the employer giving up plan design authority or broader governance control. Larger employers also typically have the asset scale to negotiate competitive fees on their own, reducing some of the economies-of-scale advantage that makes PEPs attractive to smaller plans.
And while a PEP can reduce certain fiduciary burdens, fiduciary responsibility doesn’t disappear. It becomes concentrated in the decision to select and monitor the PPP itself. Safe harbor rules may eventually provide clearer guidance around provider selection, but they won’t eliminate the underlying obligation.
“Joining a PEP is still a fiduciary decision, not an exit from one,” Mr. Schmitt writes. For the employers PEPs were designed to serve, the tradeoff may be straightforward. For larger, more sophisticated plan sponsors, it’s often more complicated.
