Retirement benefits are an important part of attracting and retaining employees. For many construction businesses, offering a retirement plan can be difficult to manage. Administrative responsibilities, fiduciary obligations, and compliance requirements can make sponsoring a traditional 401(k) plan feel overwhelming, especially for small and mid-sized companies.

A Pooled Employer Plan (PEP) is a retirement plan option designed to simplify plan management while still providing employees with access to a competitive retirement benefit. For construction companies navigating workforce challenges and rising costs, a PEP may be worth considering.

Not all PEPs are the same. Plan flexibility, investment options, and administrative structures can vary significantly, making it important to evaluate which PEP best aligns with your company’s needs.

What is a Pooled Employer Plan?

A Pooled Employer Plan (PEP) allows multiple unrelated employers to participate in a single retirement plan. The plan is administered by a Pooled Plan Provider (PPP), which assumes many of the administrative and fiduciary responsibilities associated with plan management. Under this structure, each employer still maintains its own group of participating employees and plan design features, but benefits from operating within a larger plan. Key features of a PEP include:

• Multiple employers participating in one retirement plan
• Centralized administration managed by a Pooled Plan Provider
• Shared plan costs across participating employers
• Reduced administrative and fiduciary burden for individual companies

PEPs were introduced through the SECURE Act of 2019 to make retirement plans more accessible for businesses that may not have the resources to manage a plan on their own.

What are the potential benefits for construction companies?

Construction businesses often operate with lean administrative teams, fluctuating workforces, and tight margins. Managing a retirement plan in that environment can quickly become a burden. A PEP structure can help shift that burden while still allowing you to offer a competitive benefit.

Reduced Administrative Responsibilities

One of the biggest advantages of a PEP is the ability to offload many of the time-consuming tasks associated with plan management. Instead of your internal team coordinating with multiple vendors, tracking deadlines, and managing compliance requirements, the Pooled Plan Provider takes the lead. This typically includes:

• Plan administration and compliance oversight
• Annual filings (Form 5500) and required reporting
• Investment lineup monitoring and documentation
• Participant notices and disclosures

For many construction companies, this means HR or finance leaders can spend less time managing a retirement plan and more time focused on operations, workforce planning, and job profitability.

Cost Efficiencies

PEPs create economies of scale by grouping multiple employers into a single plan. That scale can lead to more competitive pricing across administrative services, recordkeeping, and investment management. In practice, this may result in:

• Lower per-participant administrative fees
• Access to institutional-level investment options that may not be available in a standalone plan
• Reduced need for internal or external resources to manage the plan
• Removal of individual 401(k) plan audit if currently required

While cost savings will vary, many employers find that a PEP helps stabilize and, in some cases, reduce total plan expenses over time, especially when compared to maintaining a smaller, standalone plan.

Improved Employee Benefits

In a competitive labor market, especially in construction, where skilled workers are in high demand, benefits can play a meaningful role in attracting and retaining talent. A PEP allows employers to offer:

• A professionally managed retirement plan
• Institutionally priced investment options
• A benefit that aligns with what larger employers may offer

This can help position your company as a more attractive employer without requiring the internal infrastructure typically needed to support a high-quality plan.

Reduced Fiduciary Exposure

Sponsoring a retirement plan comes with fiduciary responsibilities, which can carry significant risk if not properly managed. In a PEP, many of these responsibilities are assumed by the Pooled Plan Provider. This often includes:

• Investment selection and ongoing monitoring
• Ensuring plan compliance with ERISA requirements
• Managing plan governance and documentation

While employers still retain certain duties, such as selecting and monitoring the provider, the overall fiduciary burden is significantly reduced. For business owners and leadership teams, this can provide added confidence that the plan is being managed appropriately.

Considerations Before Joining a PEP

While PEPs can provide meaningful advantages, they aren’t the right fit for every construction company. Before joining a PEP, employers should consider:

• Plan flexibility: PEPs often have more standardized plan features, and flexibility varies widely between providers.
• Provider selection: The Pooled Plan Provider (PPP) plays a central role in managing the plan, so choosing one with strong oversight and clear communication is essential.
• Employee demographics: Companies with higher employee turnover often benefit significantly from a PEP due to reduced administrative work, while companies with lower turnover may see fewer administrative advantages.
  
  

Is a PEP right for your business? Lutz can help you decide.

If a PEP structure is something you're considering, we can help you evaluate your options and find a plan that fits your company’s needs. Our Pooled Employer Plans were designed with construction businesses in mind. We help you implement a modern retirement solution by sharing plan costs, delegating key fiduciary responsibilities, and offloading time-consuming administrative tasks. Contact us to learn more.

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