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MEPs, PEPs, and Single Employer 401(k) Plans

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What is a Multiple Employer Plan (MEP)?

A Multiple Employer Plan (MEP) is a retirement plan, often structured as a 401(k), that multiple employers can join. These employers typically share a common characteristic, such as being part of the same industry or geographical area. An MEP organizer administers the plan, assuming fiduciary and administrative responsibilities on behalf of participating employers.

What is a Pooled Employer Plan (PEP)?

Introduced by the SECURE Act, a Pooled Employer Plan (PEP) allows unrelated employers to participate in a single, pooled 401(k) plan. A Pooled Plan Provider (PPP) registered with the Department of Labor and IRS oversees the PEP, serving as the named fiduciary and ERISA 3(16) plan administrator. This structure aims to simplify plan management and reduce administrative burdens for employers.

How do MEPs and PEPs differ from Single Employer 401(k) Plans?

In MEPs and PEPs, the organizer or PPP assumes many responsibilities associated with managing a retirement plan, including hiring and monitoring service providers and overseeing investments and operations. This arrangement can alleviate administrative and fiduciary burdens for participating employers. In contrast, a Single Employer 401(k) Plan is established and maintained by one employer, who retains control over plan design, service provider selection, and investment options.

What are the benefits of participating in a MEP or PEP?

Participating in a MEP or PEP can offer several advantages:

  • Reduced Fiduciary Responsibility: The MEP organizer or PPP takes on fiduciary duties, including selecting and monitoring service providers and investment options.
  • Reduced Administrative Responsibility: Day-to-day administration and compliance with applicable rules and regulations are managed by the MEP organizer or PPP.
  • Potential Cost Savings: Pooling plan assets may lead to better pricing on investments and reduced plan expenses due to shared costs among participating employers.

These benefits can make MEPs and PEPs attractive to small and mid-sized businesses seeking to provide retirement plans without the full administrative and fiduciary responsibilities.

When might a Single Employer 401(k) Plan be more suitable?

While MEPs and PEPs offer shared responsibilities and potential cost savings, a Single Employer 401(k) Plan might be preferable if:

  • Customization Needs: The employer desires specific plan design features tailored to their employees' needs.
  • Control Preferences: The employer wants to select their own service providers and have direct oversight of plan operations and investments.
  • Participant Experience: The employer aims to provide a unique participant experience, including personalized education and guidance.

In such cases, maintaining a Single Employer 401(k) Plan allows for greater flexibility and control.

How can Betterment at Work assist with retirement plan decisions?

Betterment at Work offers customizable 401(k) plans designed to fit your organization's goals and employee needs. With flexible plan design features, dedicated support, and transparent pricing, Betterment can help you navigate the complexities of retirement planning, whether you're considering a Single Employer 401(k) Plan or exploring other options.

Understanding the differences between MEPs, PEPs, and Single Employer 401(k) Plans is crucial in selecting the right retirement plan for your business. Consider your organization's specific needs, desired level of control, and the benefits you wish to offer your employees when making this important decision.