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Pooled Employer Plans offer new options for CPAs and their clients

Written on May 23, 2024

Employee retirement plan audits have a reputation as a risky, low profit service for accounting firms, expensive for the client plan sponsor, and time consuming and complicated for both parties, but thanks to a new option, it doesn’t have to be that way.  


“Employee retirement plan audits are like having a root canal from July to October,” said Chris Winters, CRPS, director of retirement plan services at TFO Wealth Partners. 

Winters addressed attendees at OSCPA’s 2024 Employee Benefit Plan Audit Conference and in addition to covering technical issues, he also discussed a newer alternative for employee retirement plans: Pooled Employer Plans (PEP). 

The SECURE Act 1.0 legislation created the PEP option which became available on Jan. 1, 2021. A PEP is a multiple employer defined contribution retirement plan (i.e. a 401(k) plan) that allows unrelated employers to participate. A PEP is sponsored by a third party rather than the employer. 

Under a PEP arrangement, an individual company would not sponsor its own plan—instead, it would be a “participating employer” that outsources most of its ERISA fiduciary responsibilities, as well as the burden of retirement plan management and administration, to the PEP. This is significant because much of the current ERISA litigation is brought against employers who are cited for inadequate ERISA fiduciary oversight of their retirement plans. 

“Annual retirement plan audits tend to be low profit and come with a lot of risk, but firms don’t want to raise fees or fire a client just to get out from under the audit,” Winters said.  

CPAs can recommend a Pooled Employer Plan to a client, the client’s 401(k) plan goes into the pool, and the client is no longer required to conduct an audit because the whole PEP itself is audited and the cost of the PEP audit is shared by all.  

“This is a way for the CPA firm to possibly exit that business and be in good standing,” Winters said. “It’s a good fit.” 

Pooled plans have been around for decades in the form of Multiple Employer Plans. “Three or four companies with common ownership could band together for efficiencies under one 401(k) plan,” Winters explained. “In 2019, the SECURE Act changed the law, and now unaffiliated companies can form a pool.” 

For the greater good of the clients, each plan can shift the fiduciary responsibilities away from themselves. “Most small to mid-sized businesses have a goal of reducing their risk,” Winters pointed out. Additional benefits may include reduced costs to both the employer and employees because of the efficiencies created by the PEP. 

Even though PEPs have been around since 2019, Winters said the concept remains relatively new. TFO’s Advantage PEP is currently the only PEP in Northwest Ohio. Winters said there are currently 15 companies inside the pool with an additional five or six joining in the coming months. Winters and his team frequently present to CPA firms. “We can tell them what it will look like for their firm or their clients,” he said. “The goal is to reduce risk, reduce expenses and to enhance the participant experience.” 

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