If you are a small business owner, it’s likely that you are actively seeking ways to keep your employees happy. One perk that employees are always interested in is an attractive retirement plan. But managing retirement plans often come with huge time commitments and stress related to the nuances of the plan.
Luckily, there are solutions available. One of these options, A PEP or Pooled Employer Plan, is the perfect solution for small businesses searching for a worry-free retirement fund for their employees.
How Does a PEP Work?
A Pooled Employer Plan creates a retirement fund for various groups of small businesses to combine resources into a single plan which is maintained by a Pooled Plan Provider or PPP. The combination of funds from many small businesses allows small business retirement funds to offer benefits usually only experienced by those working for larger companies who are able to afford better perks in retirement.
Additionally, because the plan is monitored and managed by a PPP, the business owners involved in the plan are not responsible for many of the headaches and compliance issues that come with typical retirement plan options.
Is a PEP or a Standalone 401k the Better Choice for My Business?
The differences between Pooled Employer Plans and Standalone 401k plans generally come down to two broad areas:
- Time and Effort for Employer. With a standalone 401k, the employer is responsible for virtually every aspect of the plan. He or she acts as the fiduciary, is responsible for managing the plan, and is responsible for submitting all necessary paperwork to the appropriate government entities. Contrast this with a PEP, where the Pooled Plan Provider takes care of all of these requirements for all businesses involved in the plan instead.
- Standalone 401ks are more customizable than a Pooled Employer Plan. With a standalone 401k, employees can customize their investment strategy and other factors. These customizable options are unavailable in a PEP.
While there are benefits in terms of customizability in a standalone 401k plan, PEPs tend to have far more benefits when the two types of plans are compared across nearly every other category. In fact, PEPs tend to be the better plan when compared to standalone 401k plans for both employers and employees in all of the following ways:
- Less Risk for Employer.
- Less Time Commitment for Employer.
- Higher Quality of Retirement Plan.
- Better Retirement Education for Employees.
- More Services Available to Employees.
- More Money Kept in Plan for Employees.
Final Thoughts
If you are a small business owner and you are considering creating a retirement fund for your employees, a PEP may be the right choice for you. If you have questions, concerns, or just want to talk to someone about your options for a retirement plan; many plan providers are available and willing to help you. These providers can help you navigate the different choices and choose the right plan based on your business’s needs.
