If you’ve done your homework on the different types of retirement plans available to small businesses, you’ve likely come across both Pooled Employer Plans (PEPs) and Standalone 401ks.
Both of these plan types offer numerous benefits to both employers and employees. However, for many reasons that will be discussed in this article, the PEP is the better option for most businesses.
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What is a PEP?
A pooled employer plan is a retirement planning option in which a variety of small businesses (mostly unrelated in nature) enter into a retirement fund together. This plan is managed by a pooled plan provider who takes care of all compliance issues and other considerations related to retirement planning.
What is a Standalone 401k?
A standalone 401k, on the other hand, is a plan in which the business owner is responsible for many of the arduous tasks associated with running a retirement plan. Furthermore, standalone 401ks typically involve a single business.
Why Would a Company Choose a PEP Instead of a Standalone 401k?
While there are some reasons why a small business might opt for a standalone 401k, the PEP is often a much better choice.
For one thing, the PEP limits both the responsibility and the amount of time and energy business owners need to devote to retirement planning for their employees. This allows these employers more time to focus on running and improving their business instead of dealing with the many issues that can come up with regard to a 401k.
Granted, PEPs are less customizable than standalone 401ks. There is much less flexibility, as decisions are being made for a huge group of businesses rather than a smaller group within a single company.
But with that being said, PEPs also allow small businesses to access benefits that would ordinarily only be available to huge corporations with tons of resources.
How Do Employees Feel About PEPs?
In the end, it’s very important to have the support of employees when selecting a retirement plan. After all, if an employee feels that they could find better retirement options elsewhere, they may leave your company.
PEP plans offer numerous benefits to employees. Workers have the option to learn about their retirement plans and find out about different methods of investing. This is made easy by the online portal provided by the PEP. Additionally, the costs of being enrolled in a PEP tend to be much lower than they are with a standalone 401k, as the cost is spread out amongst many more people across different businesses.
Also read: Best Finance Friendly Tips For Youngsters.
How to Join a PEP
Whether your business currently has a 401k set up and you want to switch to a PEP, or your company doesn’t have a retirement plan in place, getting started is easy!
Simply contact a plan provider and they will walk you through all of the necessary steps. The process is quick and painless. Before you know it, your company will be a part of a PEP and both you and your employees can start to reap the benefits of these great plans!