The Paychex Pooled Employer 401(k) Plan

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.

If you’re starting a new plan, your business may be eligible to have 100% of your startup costs covered by SECURE Act small business tax credits. That’s a savings of up to $16,500 over three years. There is also the possibility of an additional $1,000 credit/employee per year over five years with employer contributions².

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.

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

Participating in a PEP is particularly beneficial since it's a cost-effective way to offer a retirement plan to employees. For example, if you’re starting a new plan, your business may be eligible to have 100% of your startup costs covered by SECURE Act small business tax credits. That’s a savings of up to $16,500 over three years. There is also the possibility of an additional $1,000 credit/employee per year with employer contributions². 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.

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.

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

If a customer does not have Paychex payroll, they cannot participate in the PEP at this time. 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.

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.

• Contact a Paychex Retirement Services representative
• White Paper: The Pooled Employer Plan (PEP): The Future of Small Business Retirement
• Worx Article: The Pooled Employer Plan (PEP): 5 Big Benefits for Your Small Business