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A business owner considering a PEP Retirement Plan

The Paychex Pooled Employer 401(k) Plan

The Pooled Employer 401(k) Plan (PEP) allows employers of any size to pool assets into a plan professionally administered by Paychex. The benefits? Simplified administration and enrollment, reduced liability, and the potential for savings.

How Does a Pooled Employer 401(k) Plan (PEP) Work?

Established under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, the PEP is a multiple employer plan with a difference. Historically, businesses in this type of plan were required to be part of the same industry or association (such as a trade group). Now, unrelated employers can pool their assets into a single, larger plan administered by a Pooled Plan Provider.  This makes it simpler for the employer to administer and reduces fiduciary liability.

For more details about PEP, read our article.

A business owner reviewing documents

If I went with the state program in (California), the amount of administrative work I would have had to figure out was huge because we have high turnover (in the restaurant business) .... With the Pooled Employer Plan, the cost was affordable and everything, every detail, was explained to me by Paychex."

Maria Wren
Chief People Officer
Mr. Stax Inc. (IHOP franchises)

Which Retirement Plan Fits Your Business Better?

Compare the highlights and features of the Pooled Employer 401(k) Plan vs. a traditional 401(k) plan. Each are excellent options for you and your employees to save for retirement and save on taxes. A traditional 401(k) with your choice of additional services gives you more flexibility and control, but it can be costlier and entail more work on your part.  The PEP has its own plan administrator, so you can enjoy less effort and liability, but you’ll have a little less flexibility and control. 

PEP or Traditional 401(k)

Compare Options
Cost

Reduced administrative costs.

Economies of scale.

Potentially higher administration costs than a PEP.

Set-up

The Pooled Plan Provider (P3) significantly reduces plan set-up responsibilities, including contracting with vendors and the investment manager.

As plan sponsor, the employer is involved in set-up such as plan design, choosing investments, and coordinating with vendors.

Risk

The P3 is the Plan Sponsor and relieves the employer of significant fiduciary liability.

The employer has more control but also more fiduciary risk.

Audits

The P3 assumes responsibility for audits, potentially saving employers $10,000-$20,000.

The employer of a large plan must oversee and pay for costly audits.

Tax Credits

May be eligible for up to $15,000 in tax credits over 3 years for new plans.

May be eligible for up to $15,000 in tax credits over 3 years for new plans.

Retirement Plan Resources

Which 401(k) Plan Meets Your Needs?

A Paychex representative can help you determine which 401(k) plan is the best fit for your business. Let's discuss your level of comfort with fiduciary responsibilities, how much administration you want to take on, and how a PEP can potentially save your business money on administrative costs.

Frequently Asked Questions

  • Is the Pooled Employer Plan (PEP) a good retirement plan for my business?

    Is the Pooled Employer Plan (PEP) a good retirement plan for my business?

    The PEP can be a great solution for small to mid-sized businesses that don't currently offer a retirement plan. It's a professionally administered retirement plan that includes reduced fiduciary liability, simplified plan administration for employers, and potential savings due to the pooling of resources. For those currently offering a retirement plan, this is a great solution that significantly reduces an employer's involvement with plan administration. The PEP also satisfies the retirement plan requirement in states that have this mandate.

  • I’ve wanted to start a retirement plan for my business and employees, but it seems too complicated. How will the PEP be different?

    I’ve wanted to start a retirement plan for my business and employees, but it seems too complicated. How will the PEP be different?

    Owners are busy running their business, so they may find it hard to devote time and energy to the complexities of 401(k) compliance and plan administration. The Paychex PEP significantly relieves businesses of this burden by providing a professionally administered and cost-effective retirement plan. As the formal plan administrator, we bear the bulk of the fiduciary liability for administering the plan.

    By integrating payroll with your retirement plan, Paychex helps employers achieve an even higher level of efficiency. Our integrated payroll and retirement solution simplifies administration, helps to reduce costs, and can increase reporting accuracy.

  • Will my business be eligible for tax credits for adopting the PEP?

    Will my business be eligible for tax credits for adopting the PEP?

    Per the SECURE Act, employers may be eligible for tax credits, which can add up to $16,500 over 3 years (depending on eligibility and adding auto-enrollment).

  • As the Pooled Plan Provider (P3), what will Paychex do for me compared to other retirement plans?

    As the Pooled Plan Provider (P3), what will Paychex do for me compared to other retirement plans?

    The PEP more fully approaches a "do-it-for-me" solution, relieving participating employers of many of the administrative tasks that are associated with most retirement plans. We will handle the hiring and monitoring of the 3(38) investment manager, complete the plan's independent financial audit, file the Form 5500, collect and store participant beneficiary information, deliver required participant notices, handle the loan, hardship, distribution, and QDRO (qualified domestic relations order) requests, and much more. Taking these tasks off your plate will help you focus more on your business and less on administering this valuable employee benefit.

  • If I want to adopt the PEP as a participating employer, how long will it take?

    If I want to adopt the PEP as a participating employer, how long will it take?

    The onboarding process takes approximately 35 days to complete, depending on timing of information exchanges and payroll process.

  • Will participating in a PEP be expensive or difficult?

    Will participating in a PEP be expensive or difficult?

    Participating in a PEP is particularly beneficial since it's a cost-effective way to offer a retirement plan to employees. For example, the enhanced tax credit potential (up to $5,000 for each of the first three years of the plan, plus an additional $500 for each of the first three years of the plan for auto-enrollment) can help offset startup costs for eligible employers. And with a Paychex PEP, we help make the process of establishing a plan as straightforward as possible. You will need to take some initial actions to enable us to administer the plan and meet certain legal requirements, but our trained retirement specialists are available every step of the way — from initial plan setup to onboarding and ongoing plan maintenance — to provide assistance.

  • What is the difference between a MEP and a PEP?

    What is the difference between a MEP and a PEP?

    A Multiple Employer Plan (MEP) is similar to a PEP, but it requires businesses participating in the plan to be related by industry or professional association. If one employer in the plan does not comply with plan regulations, it can disqualify the plan and put the other employers at risk. By allowing unrelated businesses to participate, the PEP opens up the playing field for smaller businesses not associated by industry. And since the Pooled Plan Provider takes on most fiduciary responsibilities, it reduces the risk to individual participating employers.

  • What businesses are eligible for pooled employer 401(k) plans?

    What businesses are eligible for pooled employer 401(k) plans?

    Any size business may be eligible to join a Pooled Employer Plan 401(k). Providers may have their own criteria for being accepted into the plan.

  • If my business doesn’t utilize Paychex for its payroll processing, can we still adopt the Paychex PEP?

    If my business doesn’t utilize Paychex for its payroll processing, can we still adopt the Paychex PEP?

    If a customer does not have Paychex payroll, they cannot participate in the PEP at this time, however, in the near future, there may be a solution for non-payroll customers. As plan administrator on the PEP, Paychex has more fiduciary liability and risk that is dependent on accurate employee and payroll data, which is achieved by integrating your payroll with our Paychex Flex solution. Contact a Paychex representative if you are interested in learning more about our payroll services.

  • Is the Paychex PEP customizable for my business and employees’ specific needs?

    Is the Paychex PEP customizable for my business and employees’ specific needs?

    Yes, the Paychex PEP has the flexibility to meet our customers’ unique needs by providing options for plan design features such as eligibility and vesting alternatives, optional matching contributions, safe harbor provision, Roth and pretax contributions for participants, auto-enrollment and auto increase, and profit-sharing options.

  • How do I get more information on the Paychex PEP?

    How do I get more information on the Paychex PEP?

Contact Us Today About Starting Your Pooled Employer 401(k) Plan