Pooled employer plans (PEPs) are the latest addition to American workers' retirement savings options menu. They were created by the SECURE Act in 2019 and enhanced by 澳洲幸运5官方开奖结果体彩网:SECURE 2.0 in 2022. However, while these plans have been around for several years, employers have been slow to adopt them. Whether you're an employer or employee, the article explains what PEPs are, with five important things to know about them.

What Is a Pooled Employer Plan?

Pooled employer plans allow a number of unrelated small or midsize employers to participate in a single 澳洲幸运5官方开奖结果体彩网:retirement plan overseen by a pooled plan provider, such as a major 澳洲幸运5官方开奖结果体彩网:mutual fund company.

5 Potential Advantages of PEPs 

1. PEPs Work Much Like Traditional 401(k) Plans

PEPs and non-PEP plans have the same tax advantages and annual contribution limits. They are also eligible for employer matching contributions. Employees are unlikely to notice much difference between a PEP and a conventional 401(k), except that a pooled plan provider might offer a wider selection of investments, says Miklos Ringbauer, a 澳洲幸运5官方开奖结果体彩网:certified public accountant (CPA) and founder of MiklosCPA Inc., an accounting and tax strategy firm in Lo💎s Angeles and Orange County, California.

2. PEPs Are Available for 403(b) Plans, Too

The Secure Act 2.0 extended the law's provisions to apply to 澳洲幸运5官方开奖结果体彩网:403(b) plans, typically offered by nonprofits and educational institutions to their employees.

3. ⛦PEPs Are Simpler for Employers than Traditiona🔯l 401(k) Plans

The pooled plan provider handles most of the everyday administrative tasks that would otherwise fall on the employer's 澳洲幸运5官方开奖结果体彩网:human resources department. For that reason, PEPs can be ideal for employers who have shied away from starting a 401(k) but need to remain competitive with other businesses in🦂 hiring and retaining workers. "Talent goes where it feels it is appreciated," Ringbauer says.

4. PEPs Reduce the Employer's Liability

While employers still have some 澳洲幸运5官方开奖结果体彩网:fiduciary duties under PEPs, the pooled plan provider takes on many of them. This lowers an employer's likelihood of facing a costly lawsuit.

5. Employers May Get a Tax Break for Enrolling in a🦋 PEP 

Businesses with 100 or fewer employees, and who meet other requirements, can be eligible for a tax credit of up to $5,000 for three years "for the ordinary and necessary costs of starting a SEP, 澳洲幸运5官方开奖结果体彩网:SIMPLE IRA or qualified plan (like a 澳洲幸运5官方开奖结果体彩网:401(k) plan)," the IRS says. That includes PEPs.

The Bottom Line

By reducing costs, administrative burdens, and legal liabilities, PEPs make it easier for small and midsize employers to offer retirement plans to their workers. If you're an employer without a 401(k), they're worth looking into. And if you're an employee without a 401(k), showing this article to your employer might just get them interested. "It's a great product, but it has taken time for businesses to hear about it," Ringbauer says.