Pooled Employer Plans

[Yolanda Vega]

Can anyone provide some insight? We are looking into this set up for our 401k plans and find it interesting.  However we only know what our consultants tell us and we would like to have some feedback from those that may have a this type of set up or or may be contemplating the idea.

[Bird]

It's sort of old-fashioned but nothing wrong with it, especially for smaller companies.  It's a good way to start up a small plan inexpensively; you can convert to self-directed later.

[Pam Shoup]

Yolanda - I am not sure which question are you asking.  Are you looking to "Pool" the assets of your plans and having an investment professional manage the assets?  Or, are you looking for a Pooled Employer Plan arrangment where you have one or more plans that will be joining another plan with multiple employers and gaining a Pooled Plan Provider that is the plan sponsor, Plan Administrator and the Plan Fiduciary for the plan operations, as well as the possibility of a 3(38) financial advisor who has the fiduciary responsibilty for the plan assets? 

[Bird]

16 hours ago, Pam Shoup said:

Yolanda - I am not sure which question are you asking.  Are you looking to "Pool" the assets of your plans and having an investment professional manage the assets?  Or, are you looking for a Pooled Employer Plan arrangment where you have one or more plans that will be joining another plan with multiple employers and gaining a Pooled Plan Provider that is the plan sponsor, Plan Administrator and the Plan Fiduciary for the plan operations, as well as the possibility of a 3(38) financial advisor who has the fiduciary responsibilty for the plan assets? 

Good Q/clarification; for the record I was assuming "pooled assets" but now that I think about how the question was posed it is likely it was about a pooled employer plan.

As far as that latter arrangement goes, IMO most of the cost savings to be realized are in the "large" plan market (> 100 lives) where an (expensive) audit is required, and you are basically combining plans and getting one audit instead of many.  

[Patricia Neal Jensen]

If you are talking about pooled investments....Ugh ...to be professional about it.🤨  The best illustration of why this is a bad idea is the valuation and distribution payout problem.  Herbie terminates in June but the plan only values the pool of assets and pays benefits after December 31.  Stock market goes steadily down between June and December.

Does Herbie sue because he alleges that he is entitled to a June payout when his share was worth more?  (Probably)  The valuation costs are high and the plan sponsor will be reluctant to pay for this to be done very often during the year.

Plan Sponsor has no 404(c) protection and is subject to second guessing on the performance of the portfolio.

Participants today are used to and believe they are entitled to daily valuation and choices about the investment of plan assets.  This plan sponsor will spend all the money he has allegedly saved with this idea paying lawyers to defend his decisions and the disappointed expectations of the participants in the plan.

MEP's are an entirely different idea.  I don't like them either (TPA ends up doing more work than they are paid for) but they are very fashionable today.  Talk to someone who has been put in one sponsored by one of the payroll companies...

[RatherBeGolfing]

2 hours ago, Patricia Neal Jensen said:

This plan sponsor will spend all the money he has allegedly saved with this idea paying lawyers to defend his decisions and the disappointed expectations of the participants in the plan.

Will spend? That is a tad extreme...

[Bird]

14 hours ago, Patricia Neal Jensen said:

If you are talking about pooled investments....Ugh ...to be professional about it.🤨  The best illustration of why this is a bad idea is the valuation and distribution payout problem.  Herbie terminates in June but the plan only values the pool of assets and pays benefits after December 31.  Stock market goes steadily down between June and December.

I don't have the time or inclination to debate this but these perceived problems are manageable.