DOL Seeks Information Regarding Conflict of Interest Concerns for Pooled Employer Plans and Multiple Employer Plans

Employee Benefits & Executive Compensation

As detailed in an earlier Calfee First Alert, the SECURE Act paved the way for unrelated employers to form “Pooled Employer Plans” (PEPs) by removing the regulatory burdens that previously made it difficult for employers to join multiple employer plans. Additionally, the provisions of the SECURE Act allow employers who join a PEP to offload many of their fiduciary and administrative responsibilities for their 401(k) plans to an independent “Pooled Plan Provider,” which serves as the PEP’s named fiduciary and plan administrator.

On June 18, 2020, the Department of Labor (DOL) published a Request for Information (RFI) titled “Prohibited Transactions Involving Pooled Employer Plans Under the SECURE Act and Other Multiple Employer Plans.” The RFI requests information about business models, conflicts of interest, and prohibited transactions that may arise in the formation and operation of PEPs and traditional Multiple Employer Plans (MEPs); however, this First Alert focuses on the RFI's questions on PEPs.

Given the new opportunity for employers to outsource many of their responsibilities for maintaining a 401(k) plan through the use of PEPs and the SECURE Act’s creation of the Pooled Plan Provider, the DOL is seeking information from practitioners and service providers on the structure and operation of PEPs to determine whether new prohibited transaction exemptions (PTEs) or expansions of current PTEs are necessary. The DOL asks, in part:

  • What types of entities will act as Pooled Plan Providers?
  • What business models will Pooled Plan Providers use? Will they use affiliates as service providers? Will they offer proprietary investment products?
  • What conflicts of interest do Pooled Plan Providers expect to have with respect to the PEP and its participants?
  • How much control will the Pooled Plan Provider have over its compensation? What categories of fees and compensation will Pooled Plan Providers likely receive?
  • What current PTEs do Pooled Plan Providers, interested parties (including employer groups, associations, and Professional Employer Organizations) and their advisers anticipate relying on? Are there any amendments to current PTEs that the DOL should consider? Should the DOL consider adopting new PTEs?
  • How many employers will join a PEP? Are there any estimates of how many employers may join a given PEP?
  • Do parties anticipate any additional prohibited transactions as a result of large employers participating in a PEP? Will more parties in a PEP increase exposure to prohibited transactions?

The RFI also notes that the DOL is seeking information about PEP investments. The DOL asks what investment options are anticipated to be offered in PEPs and what role the Pooled Plan Providers anticipate playing with respect to investment options offered in PEPs.

As indicated above, PEPs will provide employers with a new opportunity to outsource many of the fiduciary and administrative responsibilities associated with sponsoring and operating a 401(k) plan. The DOL’s responses to the RFI will provide needed insight on how fiduciary and administrative responsibilities will be allocated among the network of service providers underlying a PEP. PEPs will be available starting January 1, 2021. Accordingly, many employers are starting the process to join a PEP. If your company is interested in learning more about PEPs or participating in the DOL’s Request for Information, please contact an attorney in Calfee’s Employee Benefits and Executive Compensation practice group.

For additional information on this topic, please contact your regular Calfee attorney or the author(s) listed below:


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