This series of articles examines the DOL’s July 29, 2025 release that includes interpretative guidance on PEPs, solicits information about PEP practices, includes tips for selecting PEPs, and discusses a possible fiduciary safe harbor for adopting PEPs. 2025-14281.pdf (SECURED).

The first two articles in this series,  Things I Worry About (20) and Things I Worry About (21), discussed some of the DOL’s findings when it reviewed the 2023 Forms 5500 filed by PEPs. This article moves on to the questions that the DOL suggested employers ask when adopting PEPs. That section—entitled “Fiduciary Tips for Small Employers Selecting a PEP”—posed 9 questions that employers should ask. This article and my next two provide the DOL’s questions and comments, as well as my comments.

1. Consider what a PEP has to offer you and your employees. Unlike establishing and maintaining your own retirement plan for just your employees and shouldering the day-to-day operations of the plan, PEPs can offer a turnkey retirement savings solution, managed completely by professionals. They can also offer you economies of scale. These features could leave you with the time you need to run your business while simultaneously providing your employees with an opportunity to save and achieve retirement security.

Comment: In case you didn’t pick up on it, the DOL’s comments suggest that it has a favorable attitude towards PEPs. Those are all “pros” and no “cons.” Having said that, a well-run PEP could offer some of those advantages, but of course the key words are “well-run”.

Turning to the DOL’s question, it is a reasonable “ask.” Actually, there are two questions in the one.

First, what are the advantages to the employer, particularly in its capacity as a fiduciary? The transfer of some of the fiduciary responsibility could be a plus. Also, even though a non-fiduciary issue, the reduction in internal administrative time, due to the transfer of some of those responsibilities to the PPP (Pooled Plan Provider) and its service providers could also be a plus. In both cases, though, the employer should understand which fiduciary and ministerial responsibilities are being transferred and which are not. That can vary from PEP to PEP. So, the question should be asked and hopefully will be answered in writing. In any event, the only way to be sure is to review the agreements before making a decision.

With regard to what a PEP offers to the employees, there may be less than expected. One likely advantage is lower expenses for the investments. However, that is not guaranteed and the employer should know whether the advantage exists as compared to other options, such as an individual plan. Professional oversight by the PPP may also be an advantage, particularly as compared to oversight by an unsophisticated or over stretched small employer. While some of those factors can be similarly achieved with an individual plan, the experience will be based on the quality of the providers, and particularly the advisor, recordkeeper and third-party administrator. If a small employer picks good quality service providers, the experience may be the same, or at least similar, to what a PEP could offer. However, if the employer doesn’t pick quality service providers, the plan operations and investments could be overly expensive or inferior. Having said that, similar issues exist for selecting a PPP and the PEP. Picking a high-quality PPP and a reasonably priced PEP are critical. It would be a mistake to assume that all PEPs are high quality. It is the job of an employer to make sure that it prudently engages a competent PPP and a reasonably priced PEP.

2. Make sure you understand the type of PEP under consideration. PEPs are a relatively new type of retirement plan, and although they all have certain things in common, they do not all operate the same way. For example, some PEPs are straightforward and offer uniform features to all participating employers and their employees. By contrast, other PEPs may offer flexibility and customization. Each approach is permissible under the law—the best fit depends on the needs and goals of your business and employees. Once you decide on the best fit, consider several similar PEPs before selecting one.

Comment: This is an important consideration. There are “vanilla” PEPs that provide a basic plan for employers who want to offer a plan to their employees, but who don’t want to go beyond that. On the other hand, there are “Neapolitan” PEPs that offer bells-and-whistles options—probably with higher costs, but with lots of attractive features to appeal to a more sophisticated workforce. (If you don’t know what I mean by “Neapolitan”, google Neapolitan ice cream—it has flavors.)  But employers should avoid “rocky road” plans. The question is, how can they do that. I suggest two partial answers. First, focus on the PPP. That is the key. Is the PPP an industry expert, with years of experience in operating plans? If the PPP an entity that can be counted on to be here 20, 30 or more years from now to pay out all the plan benefits? Is the PPP an organization with substantial financial strength? At some point there may be lawsuits and the PPP is the first line of defense. My second suggestion is to obtain advice from an adviser who specializes in retirement plans. This is complex stuff and should not be done alone.

3. Make sure you consider the experience and qualifications of the PPP. Federal law requires all PEPs to be administered by a person called the ‘‘pooled plan provider’’ or ‘‘PPP.’’ Understanding the experience and qualifications of the pooled plan provider is one of the most important—if not the single most important—aspects of joining a PEP. Federal law generally holds the pooled plan provider accountable for all operations of the PEP. Therefore, it is crucial that you ask the pooled plan provider about its experience with employee benefit plans. Examples of relevant questions for pooled plan providers include questions relating to the quality of their services, customer satisfaction, prior litigation or government enforcement matters, and whether they are registered with the Department as is required by law. Other examples of relevant questions include queries about the number of employers and participants in the plan and the amount of its assets, to evaluate whether the PEP will offer economies of scale.

Comment: This is great advice. The PPP is the primary, and ultimate, fiduciary for running the PEP. If the PPP does a good job, the plan will most likely be well run, with reasonable costs, quality services, and good investments. To do that, the PPP needs to be qualified and that takes years of industry experience. In addition, employers should consider doing a litigation search about the PPP. A history of lawsuits can be a bad sign and should be investigated. The selection and monitoring of the PPP may be the area of greatest exposure for adopting employers.

Concluding Thoughts

This is the first part of a series of articles on the DOL’s questions and comments about selecting a pooled employer plan, PEP. As these first three questions suggest, there is a fiduciary responsibility on the part of employers to prudently select and monitor the “key” to the PEP, that is, to prudently select and monitor the PPP.

More to follow.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

The views expressed in this article are the views of Fred Reish, and do not necessarily reflect the views of Faegre Drinker.