In the Pension & Investments article “New PEPs targeting firms without retirement plans,” counsel Joan Neri recommended that providers of pooled employer plans (PEPs) consider pursuing employers that don’t currently offer a retirement plan, beginning with startups.
Neri said, “The companies that already have plans in place are not going to be in a position to implement the (pooled plan provider, or PPP) structure right away, whereas the startups are.”
Plan sponsors that are happy with their plans are unlikely to be a good prospect for a PEP, and those that are less than thrilled with what they have are under a fiduciary obligation to evaluate whether transitioning to a new structure is prudent and in the best interest of their employees, Neri added.
“Selling them a new plan structure is going to be time-consuming,” Neri said, explaining that plan sponsors must consider current plan features, including protected benefits, which must be preserved under The Employee Retirement Income Security Act (ERISA).
Employers with affiliates that were merged, for example, might have their own separate preserved benefit structures, which PEPs may not be able to accommodate, Neri noted.
“Given the likelihood that companies with current plans in place are going to take their time in transitioning to the PPP structure, it really does make sense for providers to focus first on the startup,” said Neri. “If I were in the marketing department of a pooled plan provider, I would be encouraging them to go this route.”