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.