PEP growth makes the pooled plan a client-review staple

The numbers from the 2026 PLANSPONSOR Recordkeeping Survey put the pooled employer plan in a new place: 44.8% more combined 401(k) and 403(b) PEPs among responding employers than a year earlier. That jump, reported by PLANADVISER, is evidence the structure has stopped being the starter product for small businesses and become a way out of day-to-day plan administration for employers that already have plans.

Jeff Belton, a financial consultant at intellicents, says an adviser should be exposing virtually all of their clients to this structure. The obligation is to put the option in the same review as fund fees, fiduciary duties and plan design rather than push every employer into a PEP; a client who has never heard the arrangement explained has not received a complete plan review.

The advisers PLANADVISER quotes point to reduced administrative burden, economies of scale and the transfer of fiduciary duties to professional providers, and employers with a plan already in place are shopping for relief rather than access. The annual audit is where the relief becomes legible.

The audit is the easiest part of the PEP conversation to put in front of a client because it has a price: Walters & Associates reported last year that an employer generally pays between $8,000 and $13,000 for a plan audit, depending on plan size and other variables. Belton describes the exercise in terms familiar to anyone who has heard a business owner talk about the annual plan cycle: the audits have become cumbersome, more expensive, more time-consuming and an annual practice most clients just dread.

Tom Krusic, also a financial consultant at intellicents, argues the bigger-employer version: an employer that has an audit rarely sees much value in the check it writes for it, so the structure can remove the cost and put the obligation on the PEP provider. "Let's get rid of that for the employer and let's put it on the PEP provider," he says, and once the audit stops being an employer expense, the rest of the administrative handoff gets easier to sell.

Brody Geist, division vice president at The Standard, says employers of every size are adopting PEPs; plans of all sizes have HR teams that are overworked, understaffed and have better things to do than run a retirement plan. That capacity problem surfaces as receptiveness to whoever raises the subject first, rather than a neat request for a plan-structure study.

The fiduciary argument matters for a different kind of client: PLANADVISER's report notes that employers with strong risk aversion are drawn to PEPs because many fiduciary responsibilities move to professional plan providers. For a business owner carrying the weight of plan governance without an in-house retirement team, that handoff is a liability decision, not a fee comparison.

Those attractions have a price, and it belongs in the same client meeting: advisers in the PLANADVISER piece say moving into a PEP requires planning, particularly when winding down an existing standalone plan. The employer gains administrative relief and outsourced fiduciary oversight, and gives up some customization and control; many sponsors look at that exchange and conclude it is worth making, but an adviser's job is to make sure the client sees both sides before a provider makes the case for one.

The transition itself should not scare clients off, because Geist compares the process to a traditional plan conversion and says it does not look much different from a single employer plan to a single employer plan conversion at all. An adviser who has guided a client through an ordinary conversion already has most of the muscle memory; the novel label should not become an excuse to leave the question unexamined.

The PEP decision is now a practice-management issue as much as a product question. An advisory team with employer clients has three defensible outcomes: recommend the pooled plan where the arithmetic works, recommend staying standalone where control matters more, or write a documented reason for the file explaining why the structure was not adopted. The least defensible option is none of the above, because that route leaves the question to be raised by a provider in the middle of an HR crisis.

That increase puts a date on the conversation: the structure is moving into the mainstream of plan design conversations, and the plans considering it now are doing so in annual reviews an adviser already runs. Advisers do not have to endorse every pooled plan, but every employer client should hear the make-or-buy argument from its adviser before hearing it from someone else.