Financial Firms Expand Pooled Retirement Plans for Small Employers

Why It Matters

PEPs lower cost and fiduciary barriers, helping small employers attract talent and comply with retirement regulations, thereby expanding retirement coverage in a fragmented market.

Key Takeaways

• PEP market reaches $11 billion across 210 plans
• Equitable launches 403(b) PEP for nonprofits
• Small employers gain cost savings and reduced fiduciary risk
• KeyBank’s PEP assets hit $250 million with 17 employers
• 2025 DOL guidance boosts PEP adoption

Pulse Analysis

The SECURE Act of 2019 introduced pooled employer plans as a way to democratize retirement benefits for organizations that lack the scale to run traditional 401(k) or 403(b) programs. Since the first offerings appeared in 2021, the PEP market has surged to almost $11 billion in assets, encompassing 210 distinct plans, 24,000 employers, and more than a million participants. This rapid growth reflects both regulatory encouragement and a clear market need for a cost‑effective, shared‑fiduciary model that mitigates the administrative burdens that have historically deterred smaller entities.

For small nonprofits and businesses, the appeal of PEPs lies in tangible cost reductions and simplified compliance. Equitable’s new 403(b) solution targets nonprofits that struggle with limited staff and variable funding, promising hard‑dollar savings on investment fees and soft‑dollar efficiencies such as reduced audit and reporting workload. Similarly, KeyBank’s experience—$250 million in assets across 17 employers—demonstrates that even modestly sized firms can transition within 90 days, gaining access to competitive investment options and shared fiduciary oversight. These benefits translate into stronger employee retention, as retirement benefits become a realistic perk rather than a prohibitive expense.

Looking ahead, the Department of Labor’s 2025 guidance clarifies the fiduciary framework for PEPs, removing lingering uncertainty and signaling regulatory support. As more financial institutions roll out PEP platforms, competition is likely to drive further fee compression and service innovation. However, challenges remain, including integration with existing payroll systems and educating employers about the shared‑fiduciary model. Overall, PEPs are poised to reshape the retirement landscape, extending coverage to millions of workers who previously faced fragmented, costly options.