PLANADVISER - March/April 2021 - 39

compliance consult
David Kaleda
Wanta Be a PPP?
Advisers can find many ways to serve pooled employer plans
AS OF THIS January 1, a pooled plan provider (PPP) may make
available a pooled employer plan (PEP) to employers. The PEP
presents an opportunity for advisers to offer a single participant-directed,
tax-qualified defined contribution (DC) retirement
plan such as a 401(k) to a group of
employers that are unrelated. Each adviser
should understand what it means to be a
PPP and whether that's a good role for him.
A PPP is an individual or an entity
that sponsors the PEP. The terms of the
PEP must designate the PPP as the plan
administrator, and as a " named fiduciary "
as defined in Section 402(a)(2) of the
Employee Retirement Income Security Act
(ERISA). The PPP must " perform all administrative
duties ... [that] are reasonably
necessary to ensure that " the PEP meets
the requirements of ERISA and the qualification
requirements of Internal Revenue
Code (IRC) Section 401(a). These include ensuring that all
parties that handle the PEP's assets are bonded in accordance
with the provisions in ERISA Section 412. The PPP also
must ensure that the participating employers meet any obligations
they may have in order to keep the PEP compliant
with ERISA and the IRC.
The PPP must acknowledge in writing that it is the PEP's
who currently serve as fiduciaries to ERISA-covered plans
by reason of providing investment advice or discretionary
investment services may not be put off by the idea of acting
as a fiduciary in connection with the PEP.
If they intend to serve as a PPP, however,
" ... if an adviser
does not want
to be a PPP, he
may still play
an important
role in the PEP
marketplace ... "
they'll assume fiduciary responsibility for
a much broader range of services necessary
to operate the PEP. Such advisers may
lack the expertise to provide such services.
In other cases, advisers may not normally
assume fiduciary responsibility when they
serve ERISA-covered plans, although
they may be an expert at supplying some
services necessary to operate one. For
those advisers, the assumption of fiduciary
status may seem like an impediment
to being a PPP.
In either case, the PPP provisions in the
IRC and ERISA, plus other, long-standing
named fiduciary and plan administrator. Further, the PPP
must register with the Department of Labor (DOL) pursuant
to the DOL's final regulation published this past November 16.
In accordance with that regulation, the PPP must file a Form
PR-i.e., pooled plan provider registration-with the DOL at
least 30 days before starting to operate as the PPP. On the
Form PR, the PPP must disclose, among other things, contact
information for itself, for a " responsible compliance official "
and for an agent assigned to service legal process.
The PPP must also identify on Form PR the administrative,
investment and fiduciary services that it and its affiliates
will provide to the PEP. Additionally, the PPP has an obligation
to update its Form PR to report certain events such
as significant changes to the PPP's corporate or business
structure and certain criminal or civil legal proceedings.
The DOL can use Form PR to identify PPPs and, presumably,
target them for investigation.
Clearly, the PPP is at the center of the PEP and assumes a
substantial amount of legal responsibility; it could be subject
to DOL scrutiny with regard to the PEP's operation. Advisers
provisions in ERISA and related guidance, allow for advisers
to act as a PPP or, alternatively, as a fiduciary or nonfiduciary
service provider to a PEP. Importantly, an adviser
may meet the PPP requirements by working with affiliated
companies. Thus, for example, while a registered investment
adviser (RIA) may not have the expertise to serve as
plan administrator and perform all of the administrative
services necessary to ensure the PEP complies with ERISA
and the IRC, an affiliated recordkeeper or other service
provider may be able to do so.
Furthermore, the party acting as the PPP, in the event
that it lacks investment expertise, could delegate investment
management authority to an investment manager or hire an
investment adviser to supply the PPP with investment advice.
Thus, if an adviser does not want to be a PPP, he may still play
an important role in the PEP marketplace by providing these
plans advisory or administrative services. In this role, he can
partner with the entity that will be the PPP.
PEPs may prove to be an important vehicle for broadening
retirement plan access to American workers.
David Kaleda is a principal in the fiduciary responsibility practice
group at Groom Law Group, Chartered,
in Washington, D.C. He
has an extensive background in the financial services sector. His
range of experience includes handling fiduciary matters affecting
investment managers, advisers, broker/dealers, insurers, banks and
service providers.
planadviser.com March-April 2021 | 39
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PLANADVISER - March/April 2021

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