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.

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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 to administer and reduces liability.

For more details about PEP, read our article.

Advantages of a Pooled Employer 401(k) Plan (PEP)

Paychex Makes It Simple
Less Risk
Potential Savings
Attract and Retain Employees
Support

Paychex Makes It Simple

As the Pooled Plan Provider, Paychex oversees plan setup, implementation, monitoring, enrollment, and other duties. Some employers may prefer more hands-on involvement, but for those who want a simple 401(k) plan that requires little administration, the Paychex PEP is ideal.

Employers Have Less Risk

Because Paychex handles a significant amount of the plan responsibilities, PEP participating employers are not subject to the same level of liability. As the nation's number one 401(k) plan provider¹, we maintain the highest professional standards in administering the plan.

Tax Credits and Potential Savings

By pooling assets into a single large plan, employers may be able to streamline administrative costs and take advantage of economies of scale. Plus, if you’re starting a new plan, your business may be eligible to have 100% of your startup costs covered by the SECURE Act 2.0 small business tax credits. That’s a savings of up to $16,500 over 3 years. There is also the possibility of up to an additional $1,000 credit/employee per year with employer contributions². While this can apply to any new 401(k) plan, it is particularly powerful when applied to the already economical PEP.

Attract and Retain Employees

Studies show that retirement benefits have a major influence on whether employees decide to join a new company or stay with their current one. According to one Paychex survey, 94% of employees expressed interest in 401(k) plans, second only to healthcare benefits³.

Support for You and Your Employees

A business person using an online portal for retirement questions

Paychex has an array of apps and tools that allow you to check retirement services information in just a few clicks. We can provide you with online enrollment tools, an account management portal, and mobile apps where employees can check their progress. We also have a team of highly trained retirement specialists on call to help if you need it.

"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)

Pooled Employer 401(k) Plan

Less Work and Lower Cost

Traditional 401(k)

More Control

Compare Options

Cost

Potentially 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

New plans may be eligible for up to $16,500 in tax credits per year for 3 years and the possibility of an additional $1,000/employee per year with employer matching²

Retirement Plan Resources

employee reviewing retirement plan information

SECURE Act 2.0 Offers Incentives to Businesses and Employees for Retirement Plans

Compliance

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Article

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6 min. Read

With the signing into law of the omnibus spending bill that included SECURE Act 2.0 of 2022 on Dec. 29, 2022, businesses and their employees can now capitalize on added incentives related to their retirement plans.

Originally, the Securing a Strong Retirement Act of 2022 (SECURE Act 2.0) was passed in March 2022 with an overwhelming bipartisan vote of 414-5 by the U.S. House of Representatives while two separate bills on retirement were debated by the Senate. Components of each bill eventually were folded into the omnibus bill by the lame duck Congress.

SECURE Act 2.0 follows the initial phase by Congress to address the retirement crisis in the United States. Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law Dec. 27, 2019.

SECURE 2.0 is an attempt to build on the initiatives already started to help a wide range of Americans achieve retirement security and financial wellbeing. Its provisions include:

Eligibility Expansion for Small Businesses to Earn Tax Credit

Beginning in 2023, eligible businesses with 50 or fewer employees can qualify for a credit equal to 100 percent of the administrative costs for establishing a workplace retirement plan. The original SECURE Act gave startup businesses with up to 100 employees a tax credit equal to 50% of administrative costs, capped annually at $5,000. Eligible businesses with 51 to 100 employees remain subject to the original SECURE Act provision.

A New Credit for Employer Contribution Costs

Also beginning in 2023, eligible businesses with up to 100 employees might be entitled to a tax credit based on their employee matching or profit-sharing contributions. This credit, which caps at $1,000 per employee, phases down gradually over five (5) years and is subject to further reductions for employers with 51 to 100 employees.

Technical Correction for Small Businesses to Qualify for Startup Credit

If a business offers a retirement plan for the first time by joining a multiple employer plan (MEP) or a pooled employer plan (PEP), regardless of how long the MEP or PEP has existed, they should consult with their accounting professional to see if they are eligible for the credit.

Expansion of Auto-Enrollment

SECURE 2.0 requires automatic enrollment for new 401(k) or 403(b) plans beginning in 2025. The initial default rate must be between 3% and 10%, including annual auto-escalation of 1%, up to at least 10% but not more than 15%.

Automatic enrollment in a retirement plan is designed to make it easier for employees to participate. Employees who prefer not to participate can opt out. There is an exception to the requirement for small businesses with 10 or fewer employees, new businesses less than 3-years-old, churches, and governmental plans. To add even more convenience, businesses can integrate automatic enrollment with payroll.

Changes to Benefit a Multigenerational Workplace

Today’s workplace is more generationally diverse than ever. Older employees are working longer, and Millennials make up roughly one-third of the American workforce. SECURE Act 2.0 addresses these age groups.

For older employees, the law raises the required minimum distribution (RMD) age from 72 to 73 beginning in 2023, and then to age 75 beginning in 2033. There is also a new catch-up contribution provision beginning in 2025: For those ages 60 through 63, the amount would be increased to the greater of $10,000 or 50% more than the regular catch-up amount for an employer-sponsored 401(k) and 403(b).

Since today’s workforce includes more part-time workers, they will be eligible to contribute to an employer-sponsored retirement plan. The Act requires employers to allow long-term, part-time workers to defer to their 401(k) plans. Beginning in 2025, part-time employees are required to work two consecutive years and complete at least 500 hours of service in each year to be eligible, a change from the original SECURE Act’s three-years-of-service rule. The law also transforms the current Saver’s Credit that provides millions of low and middle-income individuals with an incentive to save for retirement each year to a Saver’s Match beginning in 2027. The Saver’s Match will be a federal matching contribution deposited to a taxpayer’s IRA or retirement plan.

Student Loan Payment Matching

Student loan debt, according to the Federal Reserve in 2021, impacts 45 million Americans whose combined debt for student loans is $1.75 trillion.

Starting in 2024, the law will allow employers to make matching contributions to an employee’s 401(k) per their plan provisions when an employee makes a student loan repayment, thus enabling the employee to pay off their student loan and save for retirement at the same time.

Paychex Can Help

SECURE Act 2.0 is more comprehensive than what is outlined above, but these are some of the key areas of interest that could impact businesses. Paychex Retirement Services can be utilized to help your business take advantage of implementing and managing a retirement plan.

What is a Pooled Employer 401(k) Plan?

A Pooled Employer Plan is a multiple-employer plan designed to take many administrative burdens off employers' hands. Traditionally, businesses in multiple employer plans had to be related by industry or association (such as a trade group). This made it easier for them to share a single plan and not have to file separate forms or do individual audits. Now, under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, Pooled Employer Plans do not require participating employers to be related, and a professional Pooled Plan Provider (P3) takes on most administrative responsibilities. This alleviates the burden of plan management and decreases liability, making it more attractive to smaller businesses.

Who qualifies for a PEP?

In general, a PEP is two or more unrelated small businesses that have come together, regardless of where they operate in the U.S. or their trade (per the SECURE Act). This setup is particularly advantageous for small to mid-size businesses. Keep in mind that providers may have specific criteria and PEP eligibility requirements that businesses must meet to join the plan.

Can I customize my PEP?

Some PEP providers offer options for plan design features such as eligibility and vesting alternatives, optional matching contributions, a safe harbor provision, Roth and pretax contributions for participants, auto-enrollment and auto increase, and profit-sharing options.

Why should I get a PEP for my business?

A Pooled Employer Plan is a great solution if you don't currently offer a retirement plan but have considered doing so, or have a plan and are looking to significantly reduce your involvement with plan administration. It's a professionally administered retirement plan that includes reduced liability, simplified plan administration for employers, and potential savings due to the pooling of resources. Additionally, you can integrate payroll with your retirement plan to achieve even higher levels of efficiency, accuracy, and cost savings with this employee benefit.

5 biggest benefits of a PEP

Small businesses stand to benefit significantly from a Pooled Employer Plan, particularly if they have previously experienced barriers to entry with establishing a traditional 401(k) plan in the past.

Potential administrative cost savings for employers

In a 2017 study from the Pew Charitable Trust, smaller businesses cited cost as the biggest obstacle to offering an employee retirement plan. By pooling assets into a single, large plan, employers may save on administrative costs and achieve economies of scale.

Less fiduciary risk

Because the pooled plan provider (P3) assumes most fiduciary responsibilities, employers are not subject to the same level of liability. However, to be sure the plan is problem-free, it's important to choose a P3 that will maintain professional standards such as acting in the best interests of the participants, meeting plan deadlines, and carrying out general duties.

What the Pooled Plan Provider does for you

Many businesses don't have the time, technology, or infrastructure to carry out the duties of retirement administration. The Pew Charitable Trust study found that lack of administrative resources was the second biggest obstacle to offering employees a quality retirement plan.

The PEP directly addresses this challenge. The plan is a "do it for you" approach where the P3 manages administration, monitoring, and reporting. Employers don't have to worry about plan setup, coordinating with vendors, filing most forms, employee enrollment, or any of the many complexities of 401(k) plan management. Although the plan is managed by the P3, employers still have control over things like defining matching levels and contribution limits, and ensuring the plan is performing to meet employees' needs. Some employers may prefer more hands-on involvement, but for those who want a plan that can practically run itself, a PEP is ideal.

Tax credit opportunities

To offset startup costs, the SECURE Act provides that eligible employers may be able to receive up to $5,000 in tax credits annually, with an additional $500 tax credit available for using automatic enrollment in the plan, for the first three years that the plan is effective. While this can apply to any new 401(k), it is particularly powerful when applied to the already economical PEP.

Under SECURE Act 2.0, additional credits such as the employer contribution credit is available. This credit generally is a percentage of the amount contributed by the employer, up to $1,000 per employee. It is limited to employers with 50 or fewer employees and reduced for employers with between 51 and 100 employees.

Your employees will like the plan, too

Last but not least, the reason you're doing this in the first place — your employees. As a result of the COVID-19 pandemic, employees need stability and to feel that their future is secure. As their employer, you can help provide them with peace of mind by making a high-quality retirement plan such as the popular 401(k) more accessible and easy to afford.

Look for a P3 that provides your employees with tools to help them manage their plan. This may include online auto-enrollment, or an employee portal where they can check their retirement readiness and manage their account.

Financial advisors and CPAs will also enjoy the benefits of being able to recommend a simpler plan to clients of all sizes. The PEP is a win-win for employers, employees and their families, and professional advisors who want to help their clients set up a high-quality retirement plan.

What is the difference between a PEP and other 401(k) plans?

While a PEP maintains two or more businesses' 401(k) plans, there are distinct attributes between a Pooled Employer Plan and a 401(k) plan offered by a single employer. In general, a 401(k) gives you more control, but it can be more complex to administer and requires more work from you as the employer. Alternatively, a P3 administers the PEP, so you have less control but also reduced cost and liability. The table below provides some additional comparisons.

Pooled Employer Plan	Single-employer 401(k): traditional 401(k) safe harbor 401(k), Roth 401(k), etc.
Costs
Reduced administrative burden	May include recordkeeping, third-party administration (TPA), investment management, and other fees
Plan Setup
The P3 contracts with vendors and investment managers, significantly reducing employer's plan setup responsibilities	As plan sponsor, the employer handles plan design, choosing investments, and coordinating with vendors
Risk and Responsibilities
As the plan sponsor, the P3 relieves the employer of significant fiduciary liability. Employer is still responsible for making certain decisions.	Employer acts as plan sponsor, taking on more fiduciary risk and responsibilities
Audits
P3 assumes responsibility for audits	Employer oversees and pays for audits
Tax Credits
Eligible businesses may receive up to $16,500 in tax credits over 3 years for new plans that includes $500 per year for implementing auto-enrollment	Eligible businesses may receive up to $16,500 in tax credits over 3 years for new plans that includes $500 per year for implementing auto-enrollment

With so many benefits of a PEP, it's a great time to set up a plan with a leading provider and take advantage of the opportunities for you and your employees. Learn more about the range of retirement services available today that are built specifically for small and mid-size businesses.

What Is a 401(k) Plan and How Does It Work?

Employee Benefits

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Article

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6 min. Read

Among the most popular employee benefits that appeals to both job candidates and employees is a 401(k) plan. This unique savings account allows participants to contribute a portion of their wages on a pre-tax basis, and it offers several other benefits that can help build savings for the future.

What Is a 401(k) Plan?

A 401(k) plan is a specific type of retirement savings account that is regulated by the IRS. Individuals are allowed to contribute up to a specified amount each year, and all funds in a 401(k) plan are eligible for tax benefits. Many 401(k) plans are administered through a sponsoring employer, allowing employees to contribute funds to their plans on a pre-tax basis. This makes it simple for many employees to save for retirement.

Are There Different Types of 401(k)s?

401(k) plans refer to any plan governed by subsection 401(k) of the Internal Revenue Code. While these plans all have similar requirements and limitations, the IRS code does have flexibility for different types of 401(k) plans.

Individuals can receive tax savings from several types of these retirement plans, including:

Traditional 401(k): The traditional version of a 401(k) plan can be offered by employers of all sizes and has some flexibility in how much both employees and employers contribute to the plan, up to the limitations set by the IRS Code.
Pooled Employer 401(k) Plan: The Pooled Employer Plan (PEP) allows employers of any size to pool assets into a 401(k) plan administered by a professional Pooled Plan Provider (P3). It’s ideal for businesses who want an easy-to-manage, turnkey 401(k) plan with less cost, simplified administration, and reduced fiduciary risk.
Roth 401(k): This plan combines the features of a Roth IRA and traditional 401(k), allowing employees the option of contributing after-tax dollars to the plan, thus avoiding later taxation.
Solo 401(k): Often referred to as a "self-employed 401(k)," this plan is specifically designed for employers who have no full-time employees other than the business owner and spouse.
Safe Harbor 401(k): Typically offered to highly compensated employees who own a percentage of the company, this plan stipulates that employer contributions are fully vested immediately upon contribution, therefore avoiding many of the annual compliance tests required by other 401(k) plans.
Simple 401(k): To qualify for this plan, the sponsoring employer must have 100 or fewer employees and not have any other retirement plans offered. Simple 401(k)s restrict the employer to certain contribution and filing requirements.
Profit-sharing: This unique plan allows employers to contribute on behalf of the employee based on the profits of the company; only the employer can make contributions to this plan. Employee elective contributions are not allowed.
403(b): These plans are similar to 401(k) plans but can only be offered to employees of nonprofit organizations or certain government employers.

How Does a 401(k) Work?

Traditionally, 401(k) plans are set up through an employer in association with other benefit options. When employees become benefits-eligible, some plans utilize an auto enrollment feature, or they will sign up for the plan and set their designated 401(k) contributions as part of the benefits enrollment process. Self-employed individuals can also enroll in a solo 401(k) through a qualified broker.

Once the plan is initiated, the employee's designated contribution amounts are processed through payroll deduction on a pre-tax (or post-tax for a Roth 401(k)) basis. The employer will take the payroll deduction amount and any employer match contributions and deposit the funds into the employee's designated account.

After the contributions are made, employees typically have access to an online portal where they can track the account value and performance over time, choose designated investment percentages (if offered through the employer's plan), or borrow money against the value in the account.

Rules of a 401(k): Withdrawals and Transfers

Since 401(k)s are designed to be a long-term savings vehicle for retirement, withdrawing or transferring money in and out of the account isn't a simple process. Most withdrawals from individuals below age 59 ½ will incur an early withdrawal penalty, and there are also tax implications to consider. In most cases, the money was initially contributed to the account before taxes, so the distribution is taxable, and the individual will incur an additional penalty from the IRS once they've withdrawn funds.

Fortunately, you can make a penalty-free 401(k) withdrawal if:

You are taking a qualified disaster distribution of less than $100,000 due to certain FEMA-declared disasters You are withdrawing from a tax-deferred account and are a named beneficiary, a qualified reservist, permanently disabled, or have reached age 59 ½; or
You are withdrawing from a Roth account that has been open for at least 5 tax years and are a named beneficiary, a qualified, reservist, permanently disabled, or have reached age 59 ½.

In some cases, you may want to transfer money out of an existing 401(k), such as when you change jobs to a new employer. A cash-out of the account will typically result in penalties and taxes but transferring to another 401(k) account or performing a 401(k) rollover can help you avoid those deductions.

While you can't transfer funds from a 401(k) account to your personal savings account penalty-free, you can avoid most penalties by transferring the funds to another qualified retirement account, such as an IRA.

Rules of a 401(k): Contributions and Limits

The IRS regulations that govern 401(k) plans also specify how much an individual can contribute to a plan per year. These restrictions are designed to prevent abuse of these plans by highly compensated employees and encourage early retirement planning. These contribution limits are adjusted periodically for inflation, and updated numbers are published on the IRS website.

The 401(k) contribution limits for 2023 are:

$15,500 per year in elective deferrals for a SIMPLE 401(k)
$22,500 per year in elective deferrals for traditional 401(k) and safe harbor plans
$3,500 per year in catch-up contributions for a SIMPLE 401(k) if the employee contributing to the plan is age 50 or older
$7,500 per year in catch-up contributions for traditional 401(k) and safe harbor plans if the employee contributing to the plan is age 50 or older
$66,000 per year in total contributions (employee elective deferrals and employer contributions combined)
$73,500 per year in total contributions (employee elective deferrals plus catch-up contributions and employer contributions) for employees age 50 and older

Employers can elect to match employee contributions as an additional employee benefit, but this is not required, and any employer match is subject to the total contribution limits listed above.

Nondiscrimination Requirements

When employers offer 401(k) plans to employees, those plans are subject to obligations and tests from the IRS to ensure the plan is complying with the tax code. These obligations and tests are designed to ensure that owners and partial owners — often referred to as "highly compensated employees" — cannot use 401(k) plans as a way to shelter company profits or otherwise unfairly benefit compared to non-key employees.

A traditional plan must comply with:

Average Deferral Percentage ("ADP") test: This test compares the deferrals of highly compensated versus non-highly compensated employees.
Average Contribution Percentage ("ACP") test: This test compares employer matching contributions and employee after-tax contributions for highly compensated versus non-highly compensated employees.
Top-Heavy Test: This test evaluates the overall benefits in the plan for key employees such as owners and officers compared to benefits received by non-key employees.

Pros and Cons of a 401(k) Plan

Creating a savings plan is an important part of preparing for retirement. Like any savings tool, there are pros and cons to using a 401(k). For many employees, 401(k)s are one of the best retirement planning vehicles for maximizing savings but investing in general involves some amount of risk.

Before investing in a 401(k), you should be aware of the most common pros and cons associated with this type of retirement savings plan.

Pros

Employers can match contributions (although it is not required), essentially giving employees free money.
Employers also can make a profit-sharing contribution that is not tied to employee deferrals
All plans must meet strict legal standards designed to protect your money and your interests.
You may be able to borrow against funds in your account in the event of a financial emergency instead of paying interest to a bank or other financial institution.
Most plans allow you to defer income taxes until the funds are withdrawn.

Cons

You may have limited investment options.
You will typically be charged additional penalties to access your money before age 59 ½.
Since money typically goes in tax-free, you must pay taxes even once you reach retirement age, which could be when you need your money the most.

Getting Started With a 401(k)

When saving for your retirement, employers may need some guidance, such as deciding between a Simple IRA vs 401(k) plan. For employees, the enrollment process may vary within different organizations, and different companies may also have different waiting periods for new hires before they are eligible to participate.

Eligible employees are required to receive a summary plan document which provides information about their plan and its available options. If they're not sure how much to save each paycheck, provide them resources such as our 401(k) calculator to help them estimate both expected contributions and account earnings over time.

Conclusion

For many individuals, 401(k)s are a simple way to begin saving for retirement with a tool that can help their money work harder These retirement plans offer numerous benefits in the form of tax deferred savings and investment options for future income potential. Although there are some considerations with investing, a well-informed employee can use this as a smart way to build a healthy nest-egg for the future.

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 plan 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 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?

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

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, 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.
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 401(k) Plan. 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. 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