PEP Rally Advisers expect enthusiasm from clients as pooled employer plans become available for wholly unrelated businesses. Pooled Employer Plans (PEPs), a type of open multiple employer plan (MEP), are authorized to begin next January 1. PEPs will help close the retirement plan coverage gap, by letting small businesses that have nothing in common jointly provide a 401(k) plan for their workers. MEPs allow only similar businesses to pool resources for this purpose. By permitting the PEP to file a single Form 5500 and conduct one annual audit, the arrangement relieves much of the regulatory burden that has kept many small businesses from offering retirement benefits. Most small businesses have not been offering a plan. Small-Business 401(k) Access Gap 0 - 99 100 - 199 employees employees 200 - 299 employees 300 - 399 employees 400 - 499 employees 74% 48% 36% 30% 24% Some experts say PEPs are the most significant event to restructure the small-plan marketplace since the Pension Protection Act of 2006. Plan sponsor interest in open MEPs has been growing, which means many sponsors will likely consider PEPs. Multiple-Employer Plan Growth n Number of MEP participant accounts Growth rate 3mm 1.9% 2.9mm 2.94mm 2.5% 2.88mm 2.81mm 2.8mm 2015 Source: Cerulli Associates If that trend continues, now that more employers will have access to a plan, PEPs could make a huge difference for employees. Source: Guideline 401(k) The smaller the staff a business has, the less likely that the business will have a retirement plan for its employees. Small Businesses Offering a Retirement Plan 28% <10 employees 10 - 24 employees 51% 71% of businesses without a retirement plan reported that plan setup is too expensive. 63% without a plan said they have inadequate resources to pay for plan administration. Source: SCORE Association 3.5% Lowest quartile* 11.7% Second quartile Third quartile Highest quartile *Quartiles represent the distribution of years in the workforce without eligibility for an employer-sponsored retirement plan. Source: Employee Benefit Research Institute 23.2% 26.7% Projected Increase in Retirement Savings With a PEP In a simulation that projected savings for 35- through 39-year-old workers who would otherwise be ineligible for an employer-sponsored plan, use of open MEPs- including PEPs-resulted in significantly greater savings for retirement. 2016 2017 2018 1.9% 2.99mm planadviser.com March-April 2020 | 17http://www.planadviser.com