Want your own PEP? Think again

Ary Rosenbaum
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Ary Rosenbaum - The Rosenbaum Law Firm P.C.

As an ERISA attorney an ERISA 3(16) administrator, I’ve been asked by many clients, advisory firms, bundled providers, and third-party administrators. Many advisory firms want their own pooled employer plan (PEP) and I think they should think again.

As someone with a lot of experience with open multiple employer plans (MEPs), I’ve been down this road before. Like with MEPs, almost everyone will come out with a PEP and 95% of them are going to fail. Why? It’s an asset accumulation game and while a PEP looks great on paper, it’s still a hard sell for many potential adopting employers. I also know that most advisors won’t cannibalize their existing business by shifting single-employer plan clients into the PEP. Without assets, the costs of an audit are going to eat into any potential savings for adopting employers. I work on an association MEP that has been in business for 7 years and it’s finally north of $100 million and audit costs are still an issue.

Unless you know you can attract $20 million in the first 18 months, think again about your PEP and think of larger PEPs that will able to offer your fund lineup and the opportunity to white-label their plan for your purposes.

As you know, I’m always here for a call regarding PEP opportunities.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ary Rosenbaum, The Rosenbaum Law Firm P.C. | Attorney Advertising

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