Pooled Employer Plans: Big Plans for Small Businesses

DEPARTMENT OF LABOR <SUBAGY>Employee Benefits Security Administration</SUBAGY> <CFR>29 CFR Parts 2510, 2520, 2550</CFR> <RIN>RIN 1210-AC10</RIN> <SUBJECT>Pooled Employer Plans: Big Plans for Small Businesses</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Employee Benefits Security Administration, U.S. Department of Labor. <HD SOURCE="HED">ACTION:</HD> Guidance and request for information. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document contains limited interpretive guidance to help small employers select high-quality, low-cost “pooled employer plans” or “PEPs.” This document also solicits information about prevailing pooled employer plan market practices. The Department will consider the responses as part of a process aimed at developing a potential regulatory safe harbor or safe harbors that comprehensively encourage market participants to offer and employers to join such plans. These efforts, taken pursuant to President Trump's January 20, 2025, Memorandum titled “Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis,” are designed to reduce investment costs for workers saving for their retirement, thereby improving their lives. These efforts also will help small employers provide more attractive benefits to potential hires, drawing discouraged workers into the labor force. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> To be assured consideration, comments must be received at one of the following addresses no later than September 29, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> The Employee Benefits Security Administration (EBSA) encourages interested persons to submit their comments on this request for information online. You may submit comments, identified by RIN 1210-AC10, by either of the following methods: <E T="03">Federal eRulemaking Portal: https://www.regulations.gov.</E> Follow the instructions for submitting comments. <E T="03">Mail:</E> Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, Attn: Pooled Employer Plans: Big Plans for Small Businesses Regulation RIN 1210-AC10. <E T="03">Instructions:</E> All submissions must include the agency name and Regulatory Identifier Number RIN 1210-AC10 for this request. If you submit comments online, do not submit paper copies. All comments received will be posted without change on <E T="03">https://www.regulations.gov</E> and <E T="03">https://www.dol.gov/agencies/ebsa</E> and will be made available for public inspection at the Public Disclosure Room, N-1513, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210. <E T="03">Warning:</E> Do not include any personally identifiable or confidential business information that you do not want publicly disclosed. Comments are public records that are posted online as received and can be retrieved by most internet search engines. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Scott Ness, Office of Regulations and Interpretations, Employee Benefits Security Administration, (202) 693-8500. This is not a toll-free number. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Executive Summary</HD> In this document, the Department is taking initial steps to build on positive market developments to help small employers join high-quality, low-cost retirement plans called pooled employer plans (PEPs) and provide more attractive benefits to workers and potential hires. Because PEPs are relatively new, small employers may be unaware of PEPs, or may not understand the Employee Retirement Income Security Act of 1974 (ERISA) standards applicable to them. The Department hopes to address challenges such as these which may impede small employers from taking advantage of PEPs. In addition to promoting retirement savings and reducing participant costs, expanding the use of PEPs is aligned with the Department's broader economic goals, including improving job quality and increasing labor force participation, especially at small businesses. Section II of this document provides a general description of the ERISA framework applicable to PEPs. Section III contains limited observations of the PEP marketplace made by the Department based on reports filed with the agency. Section IV provides limited interpretive guidance to help small employers understand their responsibilities as fiduciaries in connection with joining a PEP. Section V includes a set of “tips” to assist small employers in selecting a PEP. Section VI solicits information about prevailing PEP practices, responses to which will be considered as a possible basis for a regulatory safe harbor that encourages market participants to offer and employers to join such plans. Section VII seeks input on information to assist the Department in developing the report to Congress required by section 344 of SECURE 2.0. <HD SOURCE="HD1">II. Background</HD> <HD SOURCE="HD2">Statutory Authorization for Pooled Employer Plans</HD> Under ERISA, an employee benefit plan (whether a pension plan or a welfare plan) must be sponsored by an employer, by an employee organization, or by both. Section 3(5) of ERISA defines the term “employer” for this purpose as “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan, and includes a group or association of employers acting for an employer in such capacity.” By regulation, 29 CFR 2510.3-55, the Department of Labor (Department) has interpreted the definitional provisions of ERISA to permit a multiple employer plan (MEP) to be established or maintained by a bona fide group or association of employers or by a bona fide professional employer organization. Although that regulation clarified and expanded the types of arrangements that can be treated as MEPs under Title I of ERISA, it does not extend to so-called “open MEPs.” The term “open MEP” generally refers to a single defined contribution retirement plan that covers employees of multiple unrelated employers. <SU>1</SU> <FTREF/> <FTNT> <SU>1</SU>   <E T="03">See generally</E> Request for Information titled “ ‘Open MEPs’ and Other Issues Under Section 3(5) of the Employee Retirement Income Security Act” at 84 FR 37545 (July 31, 2019) (referring to “open MEPs” as single defined contribution retirement plans that cover employees of multiple unrelated employers). </FTNT> The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) removed possible legal barriers to the broader use of multiple employer plans by authorizing a new type of ERISA-covered defined contribution retirement plan—a “pooled employer plan” operated by a “pooled plan provider.”  <SU>2</SU> <FTREF/> The SECURE Act added sections 3(43) and 3(44) of ERISA to define and authorize these pooled employer plans, which offer benefits to the employees of multiple unrelated employers without the need for any commonality among the participating employers or other genuine organizational relationship unrelated to participation in the plan, thus enabling a type of open MEP. <SU>3</SU> <FTREF/> A pooled employer plan arrangement can allow most of the administrative and fiduciary responsibilities of sponsoring a retirement plan to be transferred to a pooled plan provider. Therefore, a pooled employer plan can offer employers, especially small employers, an efficient workplace retirement savings option with reduced burdens and costs compared to sponsoring their own separate retirement plan. New section 3(44) of ERISA establishes requirements for pooled plan providers, including a requirement to register with the Department and the Department of the Treasury before beginning operations as a pooled plan provider. The effective date for these provisions allowed “pooled employer plans” to begin operating on or after January 1, 2021. <FTNT> <SU>2</SU>  The SECURE Act was enacted as Division O of the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94) (December 20, 2019). </FTNT> <FTNT> <SU>3</SU>   <E T="03">See also</E> ERISA section 3(2)(C) providing that a pooled employer plan shall be treated as a single pension plan. </FTNT> <HD SOURCE="HD2">Statutory Requirements for Pooled Employer Plans</HD> Under section 3(2) of ERISA, which defines the term “pension plan” generally, <SU>4</SU> <FTREF/> a pooled employer plan is treated for purposes of ERISA as a single pension plan that is a multiple employer plan. A pooled employer plan, in turn, is generally defined in section 3(43)(A) as a plan which is an individual account plan established or maintained for the purpose of providing benefits to the employees of two or more employers. <SU>5</SU> <FTREF/> A pooled employer plan may be a plan described in section 401(a) of the Internal Revenue Code (Code) which includes a trust exempt from tax under section 501(a) of such Code or in section 403(a) of the Code. A pooled employer plan may also be a plan that consists of annuity contracts described in section 403(b) of such Code. The terms of the pooled employer plan must meet certain statutory requirements described below. <FTNT> <SU>4</SU>  Section 3(2)(A) of ERISA, in relevant part, defines a “pension plan” to mean “any plan, fund, or program . . . established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program (i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond . . . .” Section 3(2)(C) of ERISA, in relevant part, provides that a “pooled employer pla ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 49k characters. 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