Fear not the PEP: Making Your Retirement More SECURE

In December 2019, the U.S. Congress passed legislation that could be the most disruptive event in the retirement plan industry in decades. Titled “The SECURE Act” (Setting Every Community Up for Retirement), this bill paves the way for a transformation of plans known as Open MEPs (Multiple Employer Plans)—now referred to as PEPs (Pooled Employer Plans.) The SECURE Act aims to broaden retirement savings, refine plan administration, and simplify the industry rules.

A Quick Review: What is an Open MEP?

PEPs—like the Open MEPs that went before them—are fee-based, qualified 401(k) retirement plans that permit unaffiliated employers to opt into a retirement plan sponsored by an outside entity that bears responsibility for administering the plan.

For a comprehensive look at PEPs, take a look at a PDF we put together for our clients several months ago on the topic of Open MEPs. (We were on top of this movement long before the new legislation was passed!) Get your free copy here.

A Brief Update: What’s New?

Under the new legislation, employers can more easily participate in a MEP or a new variant, a “pooled employer plan,” or PEP. Both have basic features in common, the latter to be administered by a pooled plan provider.

Previously, an Open MEP was possible by law, but if one participating employer had an issue of noncompliance, the entire Open MEP (now PEP) could be disqualified. But now, noncompliance by one participating employer will not disqualify the entire MEP/PEP arrangement, thus eliminating the “one bad apple” rule.

Being able to participate in a larger pool without fear of disqualification will open up the flow of PEPs, allowing small business owners to enjoy cheaper plans and will improve retirement coverage for many more American workers.

Looking Ahead: What’s Coming?

Open MEPs have been around for a long time. But with the signing of the SECURE Act, many small companies are going to move to take advantage of the newly termed Pooled Employer Plans once they realize the benefits they bring. Likewise, many of the big retirement industry leaders are starting to offer PEPs as the public takes notice.

While many companies will be scrambling to get on board, PEPs are nothing new to us at FutureBenefits of America. We have been helping our clients with them for over 10 years! The early years were murky waters, and we learned many valuable lessons. We have also developed valuable partnerships along the way. To create a comprehensive Open MEP/PEP solution, we share supporting responsibilities with companies like:

• Fiduciary Wise, LLC – ERISA 402(a) and 3(16) Fiduciary
• MidAtlantic Trust Company – Plan assets
• FutureBenefits of America (that’s us) – Third-party administrator and recordkeeper

These relationships have allowed us to refine our PEP process while many others are just now waking up to them. Needless to say, based on what we’ve already seen, we are excited by the possibilities the SECURE Act brings.

Learn more by downloading our free PDF on Open MEPs/PEPs, then contact us to find out how we can help you take advantage of this new frontier we’ve trailblazed in retirement investments. Visit our website or give us a call at 888-207-6467.