INSIGHT

Is a PEP Right for My Business? 5 Questions to Ask 

Monica Frame • March 20, 2026

Services: Pooled Employer Plan

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If you’ve been exploring retirement plan options for your employees, you may have come across the term Pooled Employer Plan, or PEP. Introduced under the SECURE Act of 2019 and available since January 2021, PEPs have generated real interest among small and mid-sized businesses looking for a simpler, more cost-effective way to offer 401(k) benefits. And with state-mandated retirement plan requirements now in effect across many states, and more on the way, the conversation has become more urgent. If your business doesn’t already offer a qualified retirement plan, a state deadline may already be in play. 

5 Questions to Ask When Determining if a PEP is the Right Choice 

But compliance is just the starting point. The better question is whether a PEP can help you meet that requirement in a way that genuinely supports your employees, strengthens your ability to attract talent, and reduces your administrative burden. Before you decide, it’s worth working through these five questions. 

1. How Much Administrative Responsibility Do I Want to Retain? 

One of the biggest draws of a PEP is fiduciary relief. In a traditional single-employer 401(k) plan, your business bears substantial fiduciary responsibility, including investment selection and monitoring, fee benchmarking, plan document maintenance,401(k) audit requirements for larger plans, and Form 5500 filing. A PEP shifts the vast majority of that to the PPP, making investment selection, compliance testing, and plan governance their legal obligation rather than yours. 

That said, you don’t walk away entirely. As a participating employer, you still hold a fiduciary responsibility for selecting and monitoring the PPP itself. If you want to significantly reduce your administrative complexity and liability exposure, a PEP may be worth exploring. If you prefer more hands-on control and have internal bandwidth to manage all administrative and fiduciary obligations, a standalone plan might serve you better. 

2. What Is My Current Plan’s Cost Structure? 

Cost efficiency is a driving motivation for many businesses considering a PEP. By pooling assets with other employers, participants may benefit from institutional-quality investment options and shared administrative pricing that standalone small plans typically cannot achieve on their own. For smaller businesses that cannot negotiate favorable rates independently, this can be a meaningful advantage. 

Before comparing, take a close look at your current plan’s fee disclosures, including investment expenses, recordkeeping fees, and any third-party administrator costs. If you have not benchmarked your plan’s fees recently, that is a useful first step regardless of whether you pursue a PEP. 

3. Does a PEP Give Me Enough Flexibility for My Workforce? 

This is where some businesses hesitate, but the concern is often overstated. PEPs allow you to customize plan design elements, including employer matching formulas, to fit your compensation strategy and talent goals. That flexibility makes them a viable option for businesses that use retirement benefits as a competitive recruiting tool. 

4. Will Joining a PEP Affect My Audit Requirements? 

This is one of the most compelling practical benefits of a PEP. Even if your employee count would normally trigger the requirement for an independent annual audit under ERISA, participating in a PEP removes that obligation from your plate entirely. The audit responsibility shifts to the plan level rather than the individual employer level. 

This is a notable benefit for growing businesses approaching or exceeding the 100-participant threshold. As with any plan structure, it is important to understand exactly how audit and compliance responsibilities are handled within the specific PEP you are evaluating. 

5. How Does a PEP Fit Into My Broader Benefits and Compliance Strategy? 

A retirement plan does not exist in isolation. It intersects with your payroll processes, HR systems, tax planning, and overall employee compensation strategy. Switching to a PEP while simultaneously managing other changes, like a payroll provider transition or HR system upgrade, can create complexity if not carefully coordinated. 

It is also worth considering how recent legislation, including SECURE 2.0 Act provisions taking effect in 2026, affects any plan you are evaluating. Features like mandatory Roth catch-up contributions and updated contribution limits apply regardless of plan structure, and understanding how a PEP handles those requirements on your behalf is an important part of due diligence. 

Making Your Decision with Confidence 

There is no universal right answer when it comes to choosing between a PEP and a standalone retirement plan. Not every business benefits from making the move, and the decision requires careful analysis of your current situation, workforce demographics, actual costs, and strategic objectives. The best choice depends on your business size, administrative capacity, cost priorities, and long-term goals. 

BPM’s professionals work with businesses through every stage of this process, from strategic evaluation and provider selection to implementation, payroll integration, and ongoing advisory support as your needs evolve. Whether you are considering a PEP for the first time or reassessing your current retirement plan setup, BPM brings together accounting, tax, and advisory perspectives to help you see the full picture. 

Ready to find out whether a Pooled Employer Plan makes sense for your business? Contact BPM to schedule a comprehensive evaluation of your current retirement plan situation and explore your options.