Understanding the Differences in Single Employer Plans, Pooled Employer Plans, and Multiple Employer Plans

The decision between a SEP, PEP, or MEP depends on an employer’s specific needs, resources, and preferences. In this blog, we review the differences in Single-Employer Plans, Pooled Employer Plans, and Multiple Employer Plans.

Single Employer Plan (SEP)

A Single Employer Plan (SEP) is a retirement plan sponsored by a single employer for its employees, without pooling assets with other employers.

Advantages:

  • Complete Control: The employer has full control over the plan design, administration, and investment choices, allowing for tailored customization to meet the specific needs of its workforce.
  • Customization: SEPs offer the highest level of customization compared to PEPs and MEPs, as the plan is designed specifically for the single employer’s employees.
  • Fiduciary Control: The employer retains all fiduciary responsibilities, which can be beneficial for those who prefer direct oversight and management of the plan.

Pooled Employer Plan (PEP)

A Pooled Employer Plan (PEP) is a type of retirement plan created under the SECURE Act of 2019, which allows unrelated employers to participate in a single, pooled plan managed by a Pooled Plan Provider (PPP).

Advantages:

  1. Simplified Administration: The PEP is administered by the PPP, reducing the administrative burden on participating employers.
  2. Fiduciary Responsibility: The Pooled Plan Provider (PPP) takes on much of the fiduciary responsibility, including plan compliance and investment management.
  3. Cost Efficiency: By pooling assets, PEPs can achieve economies of scale, potentially reducing fees for participating employers and employees.
  4. Broad Accessibility: Any employer, regardless of size or industry, can join a PEP, making it an attractive option for small businesses that might not be able to sponsor their own plan.

Multiple Employer Plan – Closed (MEP)

A Multiple Employer Plan (MEP) allows two or more unrelated employers with a bona fide nexus to participate in a single retirement plan. MEPs existed before the introduction of PEPs, but they required a common nexus or connection between participating employers.

Advantages:

  1. Administrative Efficiency: Like PEPs, MEPs offer shared administrative duties, which can reduce the workload for participating employers.
  2. Cost Sharing: Employers can share the costs of plan administration, reducing the expense for each participating company.
  3. Customization: MEPs often allow more flexibility and customization for individual employers compared to PEPs.

In summary, the decision between a SEP, PEP, or MEP depends on the specific needs, resources, and preferences of the employer. SEPs are suitable for employers desiring complete control over their plan and capable of handling the associated responsibilities while PEPs are generally more attractive for small businesses seeking simplicity and reduced fiduciary responsibilities, and MEPs may appeal to employers needing greater plan customization and willing to manage more complex arrangements.

With 29 years of experience, the ERISA Advisory Group excels in managing ERISA fiduciary issues for plan sponsors and fiduciaries. We invite you to reach out and let us share our knowledge and experiences with you.