United States

DOL issues registration regulations for Pooled Employer Plans (PEPs)

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When Congress enacted the SECURE Act, it created a new type of retirement plan called the Pooled Employer Plans (PEPs). 

A PEP arrangement allows a service provider such as an investment firm or third party administration firm to be the sponsor of a multiple employer plan that its client can adopt and the U.S. Department of Labor (DOL) will accept as a single plan for reporting purposes. Previously, the DOL took a position that many such arrangements constituted a collection of single employer plans that each had its own Form 5500 filing requirement (including potentially a required audit of the plan).

Service providers referred to in the SECURE Act and the regulations as Pooled Plan Providers (PPPs) cannot begin operating PEPs until Jan. 1, 2021. However, the first step is that a PPP must register the PEP with both the U.S. Treasury Department, Internal Revenue Service, and the DOL. With these regulations, the DOL has taken the lead on this requirement and the proposed regulations indicate that filing with the DOL will satisfy the SECURE Act requirement to register with the Treasury Department and the IRS.

Pooled Employer Plan (PEP) Defined

A PEP is an individual account plan that a Pooled Plan Provider (PPP) establishes to provide tax qualified retirement benefits to the employees of two or more unrelated employers. 

Effective Date

The PEP rules go into effect Jan. 1, 2021.

The Role of a Pooled Plan Provider

The SECURE Act requires the plan document to name the PPP as the sponsor, plan administrator, named fiduciary, and person responsible for performing all administrative duties (including conducting proper compliance testing with respect to the plan and the employees of each employer in the plan). Essentially, the PPP must act to ensure the PEP maintains its compliance with the Internal Revenue Code and ERISA (Employee Retirement Income Security Act).

The Registration Requirements

The SECURE Act said a PPP must register, but the ACT did not provide any details on the registration requirements. The DOL has proposed an initial and supplemental registration process. A PPP will use new EBSA Form PR to submit its registration information. 

1. Initial Registration: A PPP needs to file the following information 30 to 90 days before beginning operations as a pooled plan provider:

a. General Information: The PPP’s Legal Name and any Trade Name (Doing Business As), its Federal Employer Identification Number (EIN), Business Telephone Number, Business Mailing Address, and the address of any public website or websites the PPP will use to market the PEP. 

b. Legal contacts: The PPP must provide the contact information for its primary compliance officer and the name and address of agent for service of legal process for the pooled plan provider.

c. Start Date: The approximate date when the PPP expects pooled plan operations to commence.

d. Service Offerings: The PPP must provide a description of administrative and investment services that it will offer or provide to Adopting Employers of the PEP. This must include identification of any affiliates expected to have a role in the provision of those administrative and investment services, and a description of the roles of such affiliates. 

e. Disclosure of past conduct: The PPP must disclose any federal or state criminal conviction related to the provisions of services to, operation of, or investments of, any employee benefit plan. This disclosure relates to the PPP itself and any officer, director, or employee of a pooled plan provider, if the conviction, or related term of imprisonment served, is within ten years of the date of the registration. 

f. Disclosure of current proceedings: The PPP must report any ongoing criminal, civil, or administrative proceedings related to the provisions of services to, operation of, or investments of any employee benefit plan, in any court or administrative tribunal by the federal or state government or other regulatory authority against the pooled plan provider or any officer, director, or employee of the pooled plan provider

2. Supplemental and Reportable Event Filings

A PPP must also supplement its registration statement in the following situations:

a. Establishment of a PEP: Before the pooled plan provider initiates operations of a pooled employer plan, the PPP must submit a supplemental filing with the name, trustee identification information, and EIN for the plan. 

b. Changes in information: The PPP must file additional information if there is any change or correction to its previously reported registration information.

c. Change in Pooled Plan Provider Circumstances: A PPP must update its registration within 30 days of the occurrence of any of the following reportable events: 

i. A merger or acquisition transaction involving the pooled plan provider, the PPP must report the date of the transaction and identify the parties to the transaction,

ii. A PPP files for bankruptcy or receivership,

iii. The PPP ceases operations as a PPP, 

iv. Receiving a written notice of any administrative enforcement action against the PPP or any officer, director, or employee of the pooled plan provider, if such action relates to the provision of services to, operation of, or investments of any pooled employer plan or other employee benefit plan, 

v. Receipt of a written notice of a finding by a court or governmental agency of fraud or dishonesty against the pooled plan provider or any officer, director, or employee of the pooled plan provider, related to the provision of services to, operation of, or investments of any pooled employer plan or other employee benefit plan, or

vi. If the PPP learns of the filing of any criminal charges against the pooled plan provider or any officer, director, or employee of the pooled plan provider, related to the provision of services to, operation of, or investments of any pooled employer plan or other employee benefit plan.

What an Employer Needs to Know about PEPs

From an employer’s perspective, a PEP may be an attractive way to establish a 401(k) plan at a reasonable cost. It is not a free ride in any way. The PPP will charge expenses and the employer will likely have the cost of making, matching or other employer contributions. In addition, an employer adopting a PEP needs to understand that it will still have fiduciary responsibilities in such an arrangement. While the Pooled Plan Provider will take on much of the burden, the employer still is responsible for monitoring the plan’s operations and for determining that the fees charged to its employee’s accounts are reasonable. 

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