Employer and employee relations in terms of retirement matters has been on congress radar for many years. Until December 2019, when the SECURE act was passed, the existing retirement plan needed a lot of reforms. SECURE is an acronym for Setting Every Community Up for Retirement Enhancement that is the foundation of a new retirement plan called pooled employer plans.
Pooled employer plans (PEP) are a fiduciary structure that allows unrelated employers to pool their resources for retirement purposes similarly, achieve economies of scales- a cost advantage ripped by companies when they produce efficiently. As PEP was expected to be geared up at the dawn of 2020, employers are given a chance to evaluate if their traditional retirement plans are fit for PEPs. Every retirement strategy comes with its limitations and benefits, and PEP isn’t left out of that bracket.
Do employers need PEP or it is just gossip in the congress?
The concept of employers merging their resources to achieve a single pooled retirement planned has been on the table for years. And, as its known congress matters move like a wounded snail! And it was happening to PEP, So employers waited patiently behind boardrooms doors and finally, PEPs was approved.
It is difficult for employers, especially in competing sectors, to settle in a common ground. But PEPs radicalized everything and today; employers can set their competitive challenges aside and agree on how they will improve their retirement plans. Such plans benefit both employers and retirees.
Achieve economic advantage
The employers are using PEPs to strategize their plans and enjoy economies of scale. With tough competitive environments, many employers were working to meet their costs, and the question about expanding their profit margins was non-negotiable; hence PEP was thrown as a saviour!
Here we are on the eve of the new decade; employers are using the power of economies of scale to set up prices plus, Pooled employer plans are helping them accessing broader investment opportunities. Generally, pooling of resources enables key players in the industry to agree on how to leverage prices and retain chief responsibilities in terms of investment and economies of scale.
Access to information
The SECURE act is the most expensive retirement reforms ever attained in a span of 10years. It not only solved the price problem, but many small employers also gained knowledge from its existence. Before the president signed it, congressmen submitted several proposals in the last few years on how to expand pooled employers plans. A keen employer must have been following up such proceedings to be enriched with the necessary information that will benefit his fraternity.
Before pooled employer plans ever existed, employers had their own traditional employer-sponsored retirement plans that were mainly localized. Apparently, PEPs brought the benefits of outsourcing administration and scaling up new hunting grounds for investments.
Any employer rolling out plans for PEPs is entitled to special legal protection. The legal obligations of plan sponsors as observed in a traditional employer-sponsored plan will no longer bother those who sign up for PEP; instead, they can use their time to focus on productivity. Moreover, their operations are under a substantial layer of fiduciary protection that didn’t exist earlier.
A pooled employer plans are a significant breakthrough in SECURE acts, which is helping employers achieve economies of scale and find new investment opportunities. Furthermore, both employer and retirees will reap the fruits of fiduciary protection.