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Myths and realities of Pooled Employer Plans

By Holly Tardif | November 9, 2023

We clear up many of the misperceptions about Pooled Employer Plans (PEPs), which are a compelling retirement plan option for many employers
Investments|Retirement|Benessere integrato|Benefits Administration and Outsourcing Solutions|Ukupne nagrade

Today defined contribution (DC) plans are the primary retirement savings vehicle for most U.S. employees, even as sponsoring a plan has become increasingly complex and time-consuming. Recent legislative changes, such as the SECURE Act and SECURE 2.0, acknowledge these challenges and offer potential solutions for employers, including easier access to a Pooled Employer Plan (PEP).

Though PEPs can allow companies to deliver the value of retirement benefits with less effort and risk, improved outcomes for employees and often lower total plan costs, some employers have been reluctant to consider them. Based on our many conversations with plan sponsors and fiduciaries, we list and debunk five common misperceptions about PEPs that persist in the market.

  1. 01

    Myth #1: PEPs are new and unproven

    Reality: In the U.S., employers have been pooling DC plan assets for decades through multiple employer plans (MEPs) and other structures. The U.S. pooled plan market makes up approximately $150 billion in assets.[1]

    Globally, employers are moving to pooled DC plans. For example, in the U.K., master trusts will be the fastest-growing market segment over the next 10 years.[2]

  2. 02

    Myth #2: PEPs are only for small or start-up plans

    Reality: PEPs can offer advantages, making them valuable for employers of all sizes. PEPs can reduce administrative burden, lower costs and provide access to innovative features, freeing HR and finance staff to focus on strategic priorities.

    PEPs can offer unparalleled scale and efficiency, providing access to shared resources and expert services that individual employers, regardless of size, typically can't attain alone. This can mitigate risk and enhance the experience for both employers and employees.

  1. 03

    Myth #3: PEPs do not benefit employees

    Reality: Lower fees can boost employee retirement outcomes, with compounding savings over a career positively impacting retirement security. Over a career, a participant with 40 basis points lower in 401(k) fees could have retirement income that lasts three years longer.[4]

    Pooled plan provider scale enhances employee access to features and innovations, such as investment options, user experience improvements, expanded savings and financial education tools.

  2. 04

    Myth #4: PEPs are one size fits all

    Reality: While PEPs focus on efficiency and cost control, flexibility varies. Some PEPs enable employers to make design decisions that preserve control over program costs and alignment with total rewards strategy.

    Independent and unbiased pooled plan providers have the flexibility to choose best-in-class solutions for the PEP and its participants

  3. 05

    Myth #5: PEPs are difficult to monitor

    Reality: Employers have a fiduciary responsibility to monitor the PEP’s pooled plan provider and other named fiduciaries, a less onerous task compared to a traditional 401(k) plan.

    While some PEPs do not have transparency, other PEPs offer a transparent service model and fees.

    In the LifeSight PEP, participating employers only need to interact with WTW and Transamerica (in a limited capacity) in their oversight role.

  4. Want to learn more?

    PEPs could be the timely solution employers and employees need to navigate the challenges of retirement planning with fresh confidence and efficiency.

    Please contact us to learn more about PEPs and how the LifeSight PEP can help you meet your retirement strategy needs.


    1. Source: 2021 Form 5500 data. Return to article
    2. Source: Broadridge UK DC and Retirement Income report 2023. Return to article
    3. As of December 31, 2022. Return to article
    4. This example uses a proprietary WTW methodology for estimating retirement readiness outcomes. The methodology develops an age of financial independence as a single measure of retirement readiness. A user is financially independent, or no longer required to work to maintain their standard of living, when the actuarial present value of his or her retirement resources is sufficient to cover his or her needs for life. The outcomes of this methodology are estimates based on assumptions, which cannot be predicted with certainty and does not constitute investment advice. This example is for illustrative purposes only. Actual fee savings and outcomes may vary significantly.. Return to article


    This document was prepared for general information purposes only and does not take into consideration individual circumstances. The information contained herein should not be considered a substitute for specific professional advice. In particular, its contents are not intended by Willis Towers Watson US LLC and Towers Watson Investment Services, Inc., and their parent, affiliates, and their respective directors, officers and employees (WTW) to be construed as the provision of investment, legal, accounting, tax or other professional advice or recommendations of any kind, or to form the basis of any decision to do or to refrain from doing anything. The information included in this presentation is not based on the particular investment situation or requirements of any specific trust, plan, fiduciary, plan participant or beneficiary, endowment, or any other fund; any examples or illustrations used in this presentation are hypothetical. As such, this document should not be relied upon for investment or other financial decisions and no such decisions should be taken on the basis of its contents without seeking specific advice. WTW does not intend for anything in this document to constitute “investment advice” within the meaning of 29 C.F.R. § 2510.3-21 to any employee benefit plan subject to the Employee Retirement Income Security Act and/or section 4975 of the Internal Revenue Code.

    This document is based on information available to WTW at the date of issue, and takes no account of subsequent developments. In addition, past performance is not indicative of future results. In producing this document WTW has relied upon the accuracy and completeness of certain data and information obtained from third parties. This document may not be reproduced or distributed to any other party, whether in whole or in part, without WTW’s prior written permission, except as may be required by law. Views expressed by other WTW consultants or affiliates may differ from the information presented herein. Actual recommendations, investments or investment decisions made by WTW, whether for its own account or on behalf of others, may differ from those expressed herein.


Michele Brennan
LifeSight US Business Leader

Director, Retirement

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