PPP RFP Guide: Questions to Ask Before You Join a PEP

Posted on 2025-12-31 09:48:57

Public and private employers alike are reevaluating their retirement plan strategies in the wake of the SECURE Act and its expansion of Pooled Employer Plans (PEPs). For many organizations, especially small and mid-sized employers, the promise of consolidated plan administration, streamlined fiduciary oversight, and potential cost efficiencies is compelling. But choosing the right Pooled Plan Provider (PPP) through a thoughtful RFP process is crucial. The right partner can simplify retirement plan administration and enhance participant outcomes; the wrong one can create compliance https://rentry.co/2fzcsf8o gaps and operational headaches.

This guide outlines a practical approach to issuing a PPP RFP, what to assess in each proposal, and how to align a PEP decision with your organization’s goals, risk tolerance, and workforce needs.

Why PEPs Are on the Radar

The SECURE Act introduced PEPs to expand retirement plan access and reduce barriers to offering a 401(k) plan structure. Unlike a traditional single-employer plan or a Multiple Employer Plan (MEP) that historically required a nexus among employers, a PEP allows unrelated employers to participate in a unified structure overseen by a PPP. In theory, the PEP model can deliver:

Consolidated plan administration and vendor coordination Professional fiduciary oversight and plan governance Potentially lower fees through scale Streamlined ERISA compliance and reduced employer liability Consistency in investment lineup and operational standards

However, a PEP is not one-size-fits-all. Employers must weigh the loss of some design flexibility against the administrative and fiduciary efficiencies gained. Your RFP should test these trade-offs.

How to Structure a PPP RFP

Before you issue an RFP, clarify your objectives:

Outcomes: What are your goals for participant savings rates, retirement readiness, and investment experience? Risk: How much fiduciary responsibility do you want to retain versus delegate? Cost: Are you prioritizing fee reduction, fee transparency, or fee stabilization? Operations: What pain points in retirement plan administration do you want to solve (e.g., payroll integration, eligibility tracking, loan and withdrawal processing)?

Your RFP should be organized into sections that elicit clear, comparable responses:

1) PPP Identity and Oversight

Corporate background and financial stability, including audited financials or SSAE 18/SOC reports. Experience operating PEPs, number of adopting employers, participant count, and asset levels. Fiduciary framework: Which fiduciary roles does the PPP formally assume (3(16), 3(38), trustee), and what remains with the employer? Plan governance model: committees, charters, frequency of reviews, and escalation protocols.

2) ERISA Compliance and Risk Management

Compliance program details, including testing, 5500 filing, audit coordination, QDIA management, and prohibited transaction controls. How the PPP monitors service providers, revenue-sharing arrangements, and fee reasonableness. Cybersecurity and data privacy posture: certifications, breach response plans, and vendor oversight.

3) 401(k) Plan Structure and Design Flexibility

Scope of permitted plan features within the PEP: automatic enrollment/escalation, Roth, after-tax, profit sharing, safe harbor, match formulas, eligibility, loans, hardship withdrawals. Customization boundaries and the process to request exceptions. Nondiscrimination testing approach and use of plan design levers to improve outcomes and testing success.

4) Investment Menu and Advice

Whether a 3(38) investment manager is appointed within the PEP and the criteria for fund selection, replacement, and monitoring. Availability of target date funds, stable value or capital preservation options, brokerage windows, managed accounts, and participant advice. Share class strategy and revenue offsets, with explicit disclosures.

5) Fees and Economics

Clear fee schedule: asset-based, per-participant, and transaction-based fees, including recordkeeping, trustee, advisory, audit, and PPP fees. Any breakpoints, minimums, and out-of-scope charges (e.g., plan transitions, custom payroll integrations). How fees are allocated among adopting employers and how they scale as assets grow.

6) Operations and Service Model

Recordkeeper alignment and whether the PEP is “single recordkeeper” or offers a network. Payroll integration capabilities, data validation, and error remediation procedures. Service-level agreements, response times, client success coverage, and escalation. Participant experience: enrollment, digital tools, financial wellness, multilingual support.

7) Transition and Exit Mechanics

Implementation timeline, blackout periods, and mapping strategies from legacy funds. Employer responsibilities during conversion and ongoing. Exit provisions: notice periods, fees, and how assets are spun out if you leave the PEP.

Comparing PEPs to MEPs and Single-Employer Plans

Governance and liability: PEPs centralize plan governance with the PPP, often assuming 3(16) fiduciary oversight and sometimes 3(38) investment authority. MEPs can offer similar benefits but may involve association ties or different compliance structures. Single-employer plans provide maximum design control but require deeper internal ERISA compliance and fiduciary management. Cost and scale: PEPs can leverage scale for pricing, but outcomes vary. Some employers with sufficient assets may secure competitive fees independently. Flexibility: Single-employer plans typically offer the most design flexibility; PEPs prioritize standardization for efficiency. Modern PEPs, however, increasingly allow configurable options within a defined framework.

Governance Questions to Resolve Internally

Who within your organization will act as the named fiduciary relative to the PEP adoption agreement? What reporting cadence do you need (quarterly, semiannual) and in what format? How will you measure success (participation rates, deferral rates, net-of-fee performance, error rates, service metrics)? What is your tolerance for standardization versus bespoke plan features?

Implementation Best Practices

Map your payroll and HRIS data meticulously against the PEP’s data schema before conversion. Conduct a fee and services benchmarking exercise against your current 401(k) plan structure and at least two alternative PPPs. Validate fiduciary role delineations in writing; confirm indemnification and insurance limits. Pilot participant communications with a small employee group to refine messaging. Establish a joint governance calendar with the PPP: investment reviews, fee assessments, compliance checkpoints.

Red Flags in PPP Proposals

Vague fiduciary role descriptions or reluctance to accept named 3(16) responsibilities. Opaque fee structures, heavy reliance on revenue sharing, or high minimums that disadvantage smaller employers. Limited transparency into sub-advisers, affiliated funds, or conflicts of interest. Weak cybersecurity disclosures or lack of third-party attestations. Overly rigid plan design with little capacity to address your workforce demographics.

The Bottom Line

A well-run PEP can reduce employer burden through consolidated plan administration while strengthening fiduciary oversight and ERISA compliance. But the benefits depend on the PPP’s capabilities, economics, and service culture. A robust RFP process that tests governance, operations, and investment rigor will help you choose a partner that supports both your organization and your participants.

Questions to Ask (with Answers)

1) Which fiduciary roles do you, as the PPP, agree to accept in writing, and what remains with us?

Look for the PPP to accept 3(16) plan administrator duties and appoint or oversee a 3(38) investment manager. You typically retain limited fiduciary duties tied to adopting employer decisions and payroll/data accuracy. Ensure responsibilities are detailed in the service agreement.

2) How flexible is the PEP’s plan design, and can it support our current match, eligibility, and auto-features?

Strong PEPs offer configurable options within guardrails: safe harbor, Roth, auto-enrollment/escalation, and various match formulas. If your needs are highly customized, confirm feasibility and any added costs or testing implications.

3) What is the all-in cost, and how will fees change as our assets and headcount grow?

Request a comprehensive fee exhibit, including PPP, trustee, recordkeeping, audit, and advisory fees, plus transaction charges. Ask for asset breakpoints and per-participant pricing, and require a sample invoice to verify transparency.

4) How do you ensure ERISA compliance, including annual testing, Form 5500, audit coordination, and cybersecurity oversight?

Expect a documented compliance program with SLAs, SOC reports, and clear vendor monitoring. The PPP should manage 5500 filing and coordinate audits for the PEP, with defined processes for corrections if issues arise.

5) If we decide to leave the PEP, what are the exit terms, timelines, and associated costs?

A credible PPP specifies notice periods, spin-out procedures, and fees upfront. Confirm how assets, loans, and plan documents transition, and obtain a sample exit project plan to avoid surprises.