Pooled Employer Plans (PEP)

[Belgarath]

So if an employer with a 401(k) or 403(b) signs on with a PEP mid-year, I assume when the employer's plan is merged into the PEP, there is no required nondiscrimination testing for the period prior to the merger - in other words, the coverage/nondiscrimination testing is performed for for the entire year, and would be done by the PEP provider?

[Peter Gulia]

Don’t assume; read the pooled employer plan’s participation agreement and all documents that affect relations and allocations of responsibilities between the PEP’s administrator and the participating employer.

One might be surprised by how many responsibilities a PEP’s documents can allocate to a participating employer.

[Belgarath]

Thank you!

[jsample]

I have been working under this scenero: When an employer joins a PEP mid year, the standalone plan is terminated, including needing a final 5500.  Although the termination of the standalone plan does not trigger a distributable event.   The prior tpa deals with the final short plan year, including testing.  The PEP begins their administration with the  date the plan joins the PEP, which is also a short plan year.

I am still confused on annual profit sharing contribution calculation, employment on the last day of plan year for contribution, annual match and match true-ups.  Even though there are two short plan years, it seems like some some of these issues are requested to be done annually.  This causes two census requests from the client in the initial year they join the PEP.  It causes either annual calculations to be done in excel or setting up the plan twice in the recordkeeping system, once with annual compensation and once with compensation when it joined the PEP.

I am not aware of any regulations that deal with these issues.