Employers are used to the challenge of balancing cost control, regulatory compliance and employee well-being when structuring benefit programs. Organizations rely on medical carriers, pharmacy benefit managers (PBMs), and third-party administrators (TPAs) to manage many of the complexities of their healthcare plans. This allows them to focus on their core business while ensuring employees receive high-quality coverage. This approach has provided a model for efficiently outsourcing administrative burdens, mitigating compliance risk and achieving economies of scale.
For years, a similar outsourced model was not broadly available for retirement plans. Employers spend significant time and resources to effectively manage every aspect of their own plans. They are also challenged to maintain the necessary specialized expertise needed to manage risks effectively. Now, legislation has expanded the opportunity to outsource in a holistic way in the retirement space. Pooled Employer Plans (PEPs) offer employers a way to streamline retirement plan management, much like how most employers manage their health plans. By outsourcing administrative tasks, fiduciary responsibilities and compliance requirements to a Pooled Plan Provider (PPP), employers can simplify plan management while continuing to provide employees with competitive retirement benefits.
This article explores how PEPs mirror the proven approach employers take with healthcare benefits and why we believe they represent a logical next step in benefits management.
Much like the outsourcing of health plan management, PEPs provide an opportunity for employers to streamline retirement plan management while maintaining a market-leading experience for employees. Here are some key similarities:
01
Employers have long relied on insurance carriers and third-party administrators (TPAs) to handle many of the complex aspects of their health plans, including claims processing, regulatory compliance and network management. This outsourcing allows employers to focus on their core business while ensuring employees receive attractive benefits. PEPs also offer employers the ability to delegate most plan management activities such as annual audit responsibilities, hardship and loan approvals and participant communications, simplifying operations while maintaining strong governance.
02
Many self-funded employers use stop-loss insurance to mitigate exposure to high-cost claims and shift some of the financial risk of the health plan to the insurer. PEPs offer a comparable approach by shifting fiduciary responsibility to the PPP, which assumes accountability for regulatory compliance, investment selection and operational oversight, helping to reduce the employer’s risk burden.
03
Employers who offer healthcare benefits recognize the financial advantages of pooling resources by using a medical carrier’s network instead of independently contracting with medical providers. Employers leverage economies of scale through collaboratives, gaining access to better pricing, improved service and improved negotiating power. On average, employers joining the WTW Rx Collaborative in 2024 saw a 10% to 14% reduction in cost[1]. PEPs enable employers to participate in a larger retirement plan structure, benefiting from institutional pricing on investments, shared administrative costs and potential fee reductions, which may not be achievable in a standalone 401(k) plan. Additional cost reductions may be achieved through workforce efficiencies by using an outsourced model.
04
The ever-evolving landscape of healthcare regulation—spanning the Affordable Care Act (ACA), HIPAA, ERISA and Transparency in Coverage—demands ongoing compliance management. Employers rely on insurance carriers, TPAs, benefit administrators and consultants to stay ahead of regulatory changes and reporting requirements. PEPs can simplify compliance in retirement benefits even further by shifting the responsibility for ERISA, IRS, DOL and new legislative requirements to the PPP. The PPP handles annual testing, audits and filings, reducing employer involvement in these administrative burdens.
05
Healthcare administrators often provide employers with a selection of existing plan designs, standard coverages and drug formularies, eliminating the need to create fully custom programs from scratch. This structured approach reduces complexity while still allowing for tailored options. Many PEPs follow a similar philosophy by offering pre-structured retirement plan designs that allow flexibility in key areas, enabling employers to provide competitive benefits without having to manage the intricate details of plan design, compliance, and investment selection.
06
We believe a well-designed healthcare plan not only provides coverage but also enhances the employee experience through care management, digital tools, and wellness programs. Employers understand the value of delivering an intuitive, seamless benefits experience. PEPs align with this philosophy by offering institutional-quality investment options, financial wellness resources and enhanced participant services that employers may not be able to offer on a standalone basis, making it easier for employees to engage with their retirement savings and plan for their financial future.
Employers have long recognized that leveraging outside expertise in healthcare benefits can lead to greater efficiency, risk mitigation and improved employee outcomes. PEPs offer a way to apply those same principles to retirement benefits. As organizations evaluate how to structure their benefits in a way that best serves both their business and their employees, PEPs present an option worth considering alongside traditional retirement plan structures.
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 Towers Watson Investment Services, Inc., and its 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.
