The Department of Labor’s (“DOL”) Employee Benefits Security Administration recently issued Pooled Employer Plans: Big Plans for Small Businesses, which contains interpretive guidance that seeks to encourage the establishment and adoption of pooled employer plans (“PEPs”) by demonstrating how DOL currently believes that PEPs can minimize employers’ fiduciary risks.  The guidance is accompanied by a request for information (“RFI”) soliciting public input on a wide range of questions regarding PEPs.  Questions included in the RFI range from general questions regarding market practices related to PEPs to those aimed at understanding potential conflicts of interest arising with respect to PEP investment options and developing a potential regulatory safe harbor to encourage market participants to offer, and small employers to adopt, PEPs.  A guidance project related to PEPs has been listed within DOL’s regulatory agenda since Fall 2021, and a provision within the SECURE 2.0 Act of 2022 required DOL to solicit information from the public and submit a report to Congress of its findings not later than five years after that law was enacted.

Background

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”), established PEPs, which initially were 401(k) plans adopted by two or more unrelated employers to provide retirement benefits to employees.  A PEP must designate a pooled plan provider (“PPP”) as the named fiduciary of the plan, and further designate a named fiduciary (other than a participating employer) to be responsible for collecting contributions to the plan and implementing collection procedures.  The SECURE Act requires that participating employers, participants, and beneficiaries cannot be subject to unreasonable restrictions, fees, or penalties for exiting or receiving distributions from the PEP.  The SECURE 2.0 Act expanded PEPs to allow 403(b) plans to participate and also made other changes intended to facilitate expansion of the PEP marketplace.

PEPs are intended to be a vehicle for smaller employers to provide retirement benefits to employees at a lower cost.  Moreover, PEPs allow participating employers to transfer some of the administrative and fiduciary responsibilities to the centralized pooled plan provider.  Under section 3(43)(B)(iii) of the Employee Retirement Security Act of 1974, as amended (“ERISA”), each participating employer retains fiduciary responsibility for selecting a PPP and any other named fiduciary under the Plan.  Additionally, participating employers retain fiduciary responsibility for selection and management of the PEP’s assets attributable to the employer’s employees, unless such responsibility has been delegated to another fiduciary by the PPP.  

DOL’s Guidance and Tips for Employers

DOL is explicit that the guidance was issued to encourage market participants to offer, and small employers to participate in, PEPs.  The guidance is focused on demonstrating how PEPs can minimize employer fiduciary responsibility including with respect to selection and monitoring of plan investments.  The DOL also provided preliminary tips for employers when selecting a PEP.

Guidance Regarding Investment Fiduciary Responsibility

With respect to fiduciary responsibility related to investment management, the guidance is explicit, consistent with the statutory language, that the terms of a PEP may grant the PPP, which is a named fiduciary, the authority to delegate investment and management functions to another fiduciary.  The guidance states that in the case that a PPP delegates these responsibilities to a discretionary investment manager, the DOL’s current view is that the investment manager, subject to prudent monitoring and oversight of the PPP, would be responsible under ERISA for the prudent investment and management of the plan’s assets—not the employer that adopted the PEP.  In that case, DOL states, its current view is that neither the PPP nor the participating employers are liable for acts or omissions of the investment manager, except to the extent there is co-fiduciary liability (e.g., knowing participation in or enabling of a breach of fiduciary duty).  Under this model, the PPP has the duty to directly monitor the investment manager, while participating employers retain the responsibility to prudently monitor the PPP.  The guidance does not address the fact that prudent monitoring of the PPP by the participating employers would involve some level of monitoring of the PPP’s oversight of the investment manager and implies that under this model the DOL’s current view is that the PPP serves to completely insulate participating employers from all liability associated with the investment manager’s conduct.

Fiduciary Tips for Small Employers Selecting a PEP

In addition to the interpretive guidance relating to fiduciary duties, the guidance also includes the following tips to encourage and assist small employers in picking a PEP:

1. Consider the benefits of a PEP for your business and your employees, including time savings that can be used to operate the business and the ability of your employees to save for retirement.
2. Understand the type of PEP you are considering, and whether the PEP permits customization or provides uniform features to all employers and participants.
3. Consider the experience and qualifications of the PPP, including:
   • The quality of the provider’s services
   • Customer satisfaction
   • Prior litigation or government enforcement matters
   • Whether the provider is registered with DOL as required by law
   • The number of employers and participants in the plan
   • The amount of its assets
4. Understand the PEP’s fees and the services included, such as trustee, custodial, recordkeeping, audit, and other administrative services.
5. Understand the investment options, including the number of fund options, whether they are diversified, how they perform relative to their benchmarks, whether they have materially different risk and return characteristics, and whether there are any default investment options or target date funds offered.
6. Understand issues about employers’ exposure to fiduciary liability for investments and whether the PPP hires an investment professional to act as fiduciary with respect to investment selections.
7. Consider whether the PEP is structured to assume all plan administration management, and operation functions, and ask whether the PEP’s governing documents put any fiduciary duties on the employer.
8. Keep in mind that employers have a responsibility to prudently monitor the PEP on an ongoing basis.
9. Understand your options for exiting the PEP and whether the PEP imposes any termination restrictions (including fees, timing, penalties, etc.).

DOL’s Request for Public Input

The RFI portion of the guidance solicits responses to questions for the stated purpose of considering whether additional guidance to facilitate joining PEPs would be helpful.  DOL also solicits requests to additional questions for the stated purpose of preparing the report to Congress required by SECURE 2.0.   While many of the requests relate to the operation of a PEP, current or potential participating employers may have information relevant to the following of the DOL’s requests:

1. What barriers exist for small employers to knowing about, understanding, or trusting PEPs?
2. Have employers merged existing plans into PEPs? What regulatory or other guidance would be helpful to do so?
3. Are there challenges in corporate transactions with respect to the acquiring business accepting assets from a PEP relating to the acquired business?
4. Is a regulatory safe harbor relating to employers’ fiduciary responsibility in selecting a PEP and selecting and monitoring investments desired?
5. How do employers select a PEP? Do they use third party providers to conduct a search?
6. How should employers monitor PEPs?

There are a total of 29 questions included in the RFI, many with multiple parts. DOL requests responses by September 29, 2025. 

Thompson Hine Takeaways

PEPs may be a good option for small employers seeking to provide competitive retirement benefits in a cost-effective manner, and those that do not currently have a retirement plan may be eligible for a tax credit for joining a PEP.  Other employers that wish to maximize the potential of minimizing fiduciary responsibility with respect to a 401(k) or 403(b) plan or administrative burdens of running such a plan may want to consider a PEP or establishing a structure similar to a PEP with their service providers.  And, PEPs may be an attractive option for plan participants and employers if they ultimately can demonstrate lower participant-paid fees (such as investment and administrative fees). 

However, some employers may not understand PEPs, know what to look for when selecting a PEP, or be comfortable that in fact their fiduciary liability has been materially limited. The guidance may be helpful to employers in determining whether a PEP is right for them, and it signals the DOL’s current willingness to consider a fiduciary safe harbor that could give employers even more comfort in joining a PEP. 

That said, given the possibility of different views with respect to PEPs between administrations of different parties, some employers may be concerned about possible policy shifts from a DOL run by a future administration.  In addition, the current DOL view that PEPs can be structured such that employers are left only with fiduciary liability for monitoring and oversight of the PPP and virtually no fiduciary responsibility for investment and management of plan assets has not yet been tested in court, and such view may not be adopted by the plaintiffs’ bar.

Employers looking into PEPs should consider and account for each of the DOL’s fiduciary tips described in the guidance and should be on the lookout for additional guidance from DOL in the future. Please contact your Thompson Hine attorney if you have questions about PEPs or are considering adopting a PEP, or if you would like assistance submitting comments in response to the RFI.