The PEP pitch sells fiduciary relief the contract keeps

The pooled employer plan arrives with a promise on the cover—join the pool, hand off the fiduciary work, keep the 401(k)—but only half of that holds up, and the half that doesn't is an underappreciated liability now moving through small-business retirement advice. The advisors recommending these plans are the ones who will be asked to account for the difference.

An InvestmentNews report pairs the growth with the gap: Cerulli Associates counts the number of pooled employer plans as having more than tripled between 2021 and 2024, smaller employers driving the surge because the administrative and cost burden of a standalone 401(k) has become prohibitive. For an RIA building a plan-sponsor practice, that is a product small-business clients will buy, and it is being marketed as the growth play of the moment.

Wendy Von Wald, an assistant vice president and fiduciary product manager at Travelers in Hartford, Connecticut, told the outlet that promotional materials tend to emphasize reduced fiduciary liability without giving equal weight to the responsibilities an employer keeps. "The gap between what is promoted and what the agreement actually requires is a consistent theme," she said.

The gap is not fine print. The 2019 SECURE Act amendments to ERISA that enabled PEPs left the employer's fiduciary duties intact: Section 3(43)(B)(iii)(I) requires each participating employer to select and monitor the pooled plan provider and any other named fiduciary, and Section 3(43)(B)(iii)(II) keeps responsibility for the investment and management of the plan assets attributable to its own employees unless the PPP has formally delegated that function to another fiduciary. The Labor Department's July 2025 guidance, as the report describes it, made the selection-and-monitoring duty an ongoing obligation, not a one-time check at sign-up.

For the advisor, recommending the plan is itself a fiduciary act, and the disclosure obligation travels alongside it; the report's guidance is direct, calling for a recommendation to join a PEP to come with a documented conversation about retained duties and a written summary the client can keep. The delegation clause is the hinge. Where the PPP has formally assumed investment responsibility for an employer's own staff, the menu decision moves; where it hasn't, the employer is still choosing funds and defending the choice, and selection and monitoring of the PPP itself stays with the employer in every case, which is why the ongoing review is the duty that cannot be signed away.

The monitoring is real work: Von Wald's benchmark for it—benchmarking fees, reviewing investment option performance, identifying underperformers, examining embedded fund expenses, and reviewing the management, performance, and cost structure of the PPP—describes an annual engagement with billable hours behind it. Little of that work vanishes when a plan joins a pool; the fund menu and the provider decision move to the PPP, while accountability for having chosen the PPP stays with the employer, along with the yearly proof that the choice was prudent.

The litigation parallel is the part to underline: the report notes that the same kinds of allegations behind suits against traditionally sponsored 401(k) plans—excessive fees, imprudent investments—are live here, because a pool reassigns the menu and leaves the selection decision, with the defense of it, in the employer's file.

The growth story and the liability story turn out to be the same story, and most practices will misprice it: setting up a pooled plan is the commoditized part of the work, several providers will do it, and the employer's savings on administration are the pitch. The retainer sits in the benchmarking nobody wants to run in June, the fund review that produces a memo, the fee survey the client can hand to a board; an RIA that recommends a PEP without naming that service and pricing it has delivered a cheaper plan and kept a duty it is not billing for.

This market pulls hard at RIAs for a reason: plan-sponsor work is recurring revenue that does not leave when a single client does, and a PEP lets a firm serve a small employer it could never administer profitably on its own. That is a real widening of the addressable market—and it also means one firm can stack dozens of small employers, where the documentation bar is highest, the fee per plan is lowest, and the paperwork discipline is hardest to keep.

The education problem here is familiar, and this publication has followed the advisor-education gap Cerulli calls the industry's biggest obstacle; that gap tends to close after the sale, if it closes at all. In small-business retirement plans, the terms that arrive late are a set of duties carrying the employer's name—and, if the file is thin, the advisor's as well.

Bill the monitoring, document it, keep a copy for the client and a copy for the file. The page that answers a Labor Department question is the page that justifies the fee, and it is the document the promotional materials Von Wald describes never include.