Instead, she noted, CAPTRUST might work for the plan by selecting the funds and monitoring the investments but not taking on the PEP responsibility directly. "That’s something we do for a lot of plans today. So we could very easily slot in and start doing that for a PEP.”
Are PEPs A Revolution?
Will pooled-employer plans cause a business revolution? Will a few huge aggregators roll across the land picking off all these small retirement plans and clean up? Not everyone is convinced.
Aon, which has enlisted Voya Financial as record-keeper, claims the PEP structure will change the retirement landscape as much as 401(k)s did once upon a time.
Another firm getting into the space, however, says there are caveats. Kansas City, Mo.-based insurance brokerage company Lockton, which launched a new outsourcing initiative that would make PEPs its first order of business (tapping Transamerica as record-keeper) concedes that PEPs won’t be for everybody.
“Single-employer plans generally allow for an almost limitless decision tree of design and investment options, but to achieve efficient pricing, many PEPs will likely place limits,” said Lockton in a report on its website.
“Employers who transition into a PEP will also need to pay careful attention to protected benefits to determine if a PEP can accommodate their existing employees’ rights,” Lockton added. “In addition, employers who enjoy a great deal of investment menu flexibility and the ability to make their own investment decisions may also find that a PEP cannot meet their needs.”
There are also arguments that multiple-employer plans aren’t actually having the desired effect of driving down costs in the first place, and that could pour cold water on the idea that PEP plans can change the game.
Doss at CAPTRUST says there are two very different camps forming when it comes to anticipating the success of this new market: Some think it means consolidation of the current plan provider market, especially the mid-market, while others think it’s about cracking open a market of new, tiny plans.
“If you’re talking about start-up plans, and plans that don’t currently exist, we know that there are just a ton of small businesses out there and it’s the kind of people that are not covered by a retirement plan today,” Doss said. “That was a primary focus of the reason Congress created this PEP. That was their ultimate goal … to increase coverage across the United States. But that is so much of a question mark. Because how many small businesses can you go door-to-door and get to join something like this? It’s a very grassroots effort.
“You could get a lot of uptake, or you could get a lot of small businesses that are not interested in having a retirement plan period, no matter how cheap it is," she added.