Common Pooled Employer Plan Myths—Debunked

Pooled employer plans (PEPs) are unquestionably gaining momentum as a popular workplace retirement plan option, but common misconceptions about PEPs still spark uncertainty. These myths can make financial advisors hesitant when discussing PEPs with clients, but in reality, these plans are powerful tools for streamlining plan administration, relieving fiduciary stress, and potential cost-savings.

To bridge this gap, we spoke with two Ascensus pooled plan experts, Kate Whitmore, Pooled Plan Practice Leader, and Dale Essenmacher, Vice President of Business Development - Pooled Plans. Together, they debunk the most persistent pooled employer plan myths and facts and share actionable insights for advisors.

Here’s what they had to say.

PEP Myth #1

Employers lose control of fiduciary responsibilities and unknowingly take on more risk.

Dale’s Take

“This is one of the biggest concerns we hear,” Dale explains. “The truth is, employers actually reduce their fiduciary risk by joining a PEP.”

The Pooled Plan Provider (PPP) assumes fiduciary responsibilities for plan administration and compliance, handling day-to-day risks. Employers focus on selecting and monitoring the PPP, as well as making higher-level, company-specific decisions.

“Think of it as shared responsibility,” Dale adds. “This setup minimizes the employer’s administrative burden while maintaining proper oversight.”

Key Positioning Point for Advisors

Help clients feel confident by outlining the shared fiduciary model. Highlight how the PPP reduces their workload and risk while ensuring compliance – disproving common pooled employer plan fiduciary myths. 

PEP Myth #2

Employers still handle most of the daily administration in a PEP.

Kate’s Perspective

“This couldn’t be further from the truth,” Kate explains. “A major benefit of PEPs is operational relief for employers.”

The PPP manages time-consuming tasks such as plan maintenance, compliance updates, Form 5500 filings, and even audits. Employers typically only need to provide payroll data and respond to occasional inquiries.

“HR and finance teams can focus on strategic priorities instead of being buried in retirement plan administration work,” Kate points out, addressing a key pooled employer plan administration myth.

Key Positioning Point for Advisors

When positioning PEPs to clients, place emphasis on reduced complexity and the transfer of operational tasks to the PPP.

PEP Myth #3

PEPs offer limited flexibility in plan design.

Dale’s Take

“This is another big misconception,” Dale notes. “PEP flexibility really depends on the provider, and the good PEP solutions, like the Ascensus Secure Retirement PEP, offer plenty of options.”

He goes on to highlight specific examples, such as safe harbor plans, discretionary matching, profit-sharing options, and various vesting schedules.

“Most employers find they can carry over their existing plan design with minimal adjustments,” Dale says. 

Key Positioning Point for Advisors

Educate clients about the provider’s flexibility options upfront. This will help dispel fears of rigid plans and adapt to their desired designs – countering common mistakes with pooled employer plans.

PEP Myth #4

PEPs involve multiple vendors, making them harder to manage.

Kate’s Perspective

“While some PEPs do have multiple vendors, many providers offer bundled, turnkey solutions,” Kate explains.

These solutions streamline administration dramatically. “For example, with Ascensus, participating employers generally just submit payroll files. The heavy lifting is handled by us and our fiduciary partners.”

Key Positioning Point for Advisors

Encourage clients to perform due diligence, asking clear questions about vendor involvement and division of responsibilities. Highlight bundled service options for simplified management – helping clients understand the truth about pooled employer plans.

PEP Myth #5

PEPs cost more because of hidden fees.

Dale’s Take

“Fee transparency, understandably, is a concern for many clients, but the good news is, it’s improving significantly,” Dale says.

He explains how PEPs benefit from economies of scale by pooling resources. This often leads to lower participant fees, thanks to access to institutional pricing on investments.

“It’s true that fee structures can vary,” Dale acknowledges, “but with the right provider, employers enjoy long-term cost efficiencies.”

Key Positioning Point for Advisors

Be upfront about fee structures and compare costs. Clients will appreciate your transparency and gain confidence in cost savings over standalone plans.

PEP Myth #6

Audits make PEPs too expensive for employers.

Kate’s Perspective

“PEP audits are federally required for plans with over 100 participants, but they’re structured to be more efficient than individual audits,” Kate explains.

The PPP (not the adopting employer) hires an auditor to conduct a plan-wide audit, reducing costs compared to employers handling audits individually. These audit fees can often be allocated appropriately across plan participants or assets.

“Instead of being a hurdle, audits provide protection and assurance for employers and their employees,” Kate adds.

Key Positioning Point for Advisors

Position audits as an advantage. They enhance compliance while reducing individual costs compared to standalone plan audits.

The Real Benefits of Joining a PEP

PEPs go far beyond myth-busting. They offer real, tangible advantages for employers, including:

• Shifting fiduciary responsibility to the PPP
• Simplifying plan administration
• Offering flexible plan design options
• Potential for reducing costs through centralized audits and fee efficiencies
• Freeing up internal resources to focus on core business priorities

“PEPs allow you to delegate the complexity of retirement plans while retaining the ability to shape outcomes,” Dale summarizes. Kate agrees, adding, “Understanding the facts makes it easier to build client trust and demonstrate your expertise as an advisor.”

Who Should Join a Pooled Employer Plan?

PEPs can be a great fit for small to mid-sized businesses looking for operational relief, cost savings, and simplified fiduciary management—addressing many myths about small business retirement plans and PEP setup misconceptions.