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" You have a lot of people say they're surprised [the
strategy] hadn't done more than it had in the first year and
a half, but they may not have had realistic expectations, "
he points out. " If you look at the number of registrations
and some of the flows, it's absolutely gaining traction. And I
think that's going to continue. "
In seeming agreement with his assessment, about one in
five consulting/advisory firms currently offer or are developing
a PEP, and another one-third say they are considering
it, according to the T. Rowe Price 2021 Defined Contribution
Consultant Research Study.
Meanwhile, adoption is slowly picking up as sponsors
with some other types of plans continue to look for ways
to lower their costs and reduce the administrative burden,
also as employers without a plan seek cost-effective ways
to enhance their value to potential workers in a competitive
labor market.
Adviser firm OneDigital especially sees interest from
clients in the latter group, says Kirki Fuller, a senior retirement
plan consultant for the firm in Richmond, Virginia.
Many existing plans have a unique design that does not work
easily within a pooled employer plan structure, she explains.
OneDigital offers two PEPs, one for small
firms-i.e.,
under $3 million in plan assets and fewer than 100 plan
participants-and one for larger organizations.
Beyond now being able to hold out a plan to attractive
job candidates, the small employer has a further incentive.
" We're seeing more activity concentrated in the startup
plans because of the tax credit, " Fuller says.
Under the SECURE Act, employers setting up a retirement
plan for the first time may receive a tax credit of
up to $5,000, with an additional $5,000 if they implement
automatic enrollment.
Fuller says the asset size of some of the small-employer
plans has grown more quickly than expected, as executives
within the plan roll in existing assets they had from
former plans.
" We've seen some cases where the startup plans were
over $2 million in less than a year from rollovers at companies
with a big C-suite, " Fuller says. " It's been a nice fit for
them, as far as looking at their full benefit package and what
they can offer their employees. "
New Use Cases
As interest grows, PEPs have been evolving, to better meet
plan sponsor clients' participants' needs.
An area of interest among larger OneDigital clients
has been white-label plans designed for this market. For
example, the firm has been talking to some franchises that
have not previously offered retirement benefits to their
franchisees but now see an opportunity to do so, via a PEP,
Fuller says.
Though having similarities to multiple employer plans,
the white-label PEPs are different in that the pooled plan
provider can customize design offerings, reporting and
one-on-one retirement plan consultations beyond the traditional
MEP offerings.
Doshier says a similar potential use case is for private
equity firms that are looking for a way to offer employees
retirement benefits across their portfolio companies. Other
PEPs are focusing their marketing efforts on states such as
California and Illinois whose mandates require even small
employers to provide retirement benefits.
" As PEPs get more focused, to solve specific problems,
that will be the foothold where adoption starts to accelerate, "
Doshier says.
That evolution will likely also include a shakeout among
pooled plan providers as some amass enough assets for
economies of scale to kick in and others exit the market.
" Some of the recordkeeping
firms changed their strategy
and said, 'Well, let's
offer a more competitive
product and provide 3(16)
service along with our
recordkeeping service.' "
For its part, T. Rowe Price has been asked to provide asset
management solutions for six different PEPs, Doshier says. In
some of those, the firm provides the qualified default investment
alternative, and, in others, the solution is another spot
in the core lineup. As a recordkeeper, T. Rowe Price has
implemented one PEP and has three more in process.
Other Opportunities for Advisers
Some advisers see the opportunity in PEPs, not in serving as
a PPP but, rather, as an investment consultant to the plan
itself. That is the approach that Huntington Private Bank
has taken, Zugaro says.
" We're looking at which pooled plan providers will actually
be able to stick around, and that's a whole new market
for us to go after from an investment advisory perspective
as a fiduciary, " Zugaro says.
There are other avenues for advisers to take as well, says
Patrick Rieck, vice president product, retirement and private
wealth at Hub International Ltd. in Milwaukee.
" The adviser's value proposition is becoming more plan
governance, participant education, and advice, " he says.
" Those are the types of things where the adviser is truly
adding value. I think that's the natural progression we have
been seeing. "
Hub does not currently have a PEP, but it is actively
reviewing pooled plan providers to find one to partner with,
Rieck says. " We think it's important to have an option available
to clients. But it won't be the only solution we offer, " he
notes. " This is a new market. " -Beth Braverman
planadviser.com September-October 2022 | 35
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PLANADVISER - September/October 2022

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