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With the passage of Secure 2.0, all new PEP plans with 50 employees or less now qualify to have their setup and admin fees offset for 3 full years with tax credits the government will provide. These credits could be worth up to $15,000 over 3 years to your organization! This means there’s no better time to set up your PEP 401(k) than now since your final costs (post tax credits) will never be better than today! You’ll have a tremendous new benefit to offer your employees for little expenditure and effort.
What’s a Pooled Employer Plan (PEP) 401(k)
A pooled employer plan (PEP) 401(k) plan pools together disparate, unrelated companies, called members, and offers them 401k benefits under a single retirement plan. It offers a way for an organization or partner to offer their unrelated members basic 401(k) services within a single retirement plan. That way their members don’t each have to set up their own 401(k). They can join the PEP 401(k) as a member of that organization or partner and all enjoy the benefits that 401(k) offers.
Here’s an easy way to understand the concept. If you go to the doctor and they say you need to go to the gym to go workout and get healthier, you have two options. You could go rent out a place, build your own gym, buy all the equipment yourself and handle all the administrative and liability issues. Or, you can just join your local gym and pay a small fee and have access to all the gym equipment you need with minimal hassle. The latter is an loose analogy of a PEP 401(k) vs. starting and overseeing the administrative of your own separate 401(k).
A PEP 401(k) is a great way for an organization or partner to add value to their members. It can help:
Pros of PEP 401(k)
Cons of PEP 401(k)
Reduces fiduciary & administrative responsibility vs. traditional 401(k)
Predetermined professional managed investment options that do not generally allow for additional customization
Simple, easy to understand investment options
Investment options are one size fits all that all members must adopt. Does not offer the breadth and depth of investment options a traditional 401(k) does, like access to all of our 30,000+ mutual funds and ETFs etc.
A PEP can off your organization these benefits:
1 Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.
2 Eligible employers may be able to claim a tax credit of up to $5,000, for three years, for ordinary and necessary costs of starting a 401(k) plan. IRS’ qualifying factors are: you had 100 or fewer employees who received at least $5,000 in compensation from you in the preceding year, you had at least one participant who was a non-highly compensated employee (NHCE) and in the three tax years before the first year you’re eligible for the credit, your employees were substantially the same employees who received contributions or accrued benefits in another plan sponsored by you, a member of a controlled group that includes you, or a predecessor of either. Those plans with automatic enrollment can claim a tax credit of $500 per year for a 3 year taxable period.
3 Flat fees are charged by Decimal, Inc. for recordkeeping and administrative services. Third-party service providers may assess asset-based fees to customers. Plan Sponsors are advised to review all service agreements with providers (e.g., investment advisors, custodians, broker-dealers) to evaluate total plan costs.
4 An evaluation has been conducted by Decimal, Inc. through its research of independent customer reviews on Google, Trustpilot, and the Better Business Bureau as reported by unaffiliated contributors on or before September 30, 2022, for four similar small-business 401(k) providers in the marketplace.
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San Francisco, CA 94104
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© 2023 Ubiquity Retirement + Savings
Privacy Policy
Do not sell my info
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357