PEPs vs. Traditional 401(k)s: Which Plan Structure Works Best for Your Business?

Cost, liability, administration—learn how Pooled Employer Plans compare to traditional 401(k)s and why many employers are making the switch.

Employer Plans (PEPs) vs. Traditional 401(k) Plans: What You Need to Know

When employers consider how best to structure retirement benefits, one of the most common questions is whether to stick with a traditional 401(k) plan or transition into a Pooled Employer Plan (PEP).

Both options help employees save for retirement, but differences in cost, liability, and administration can significantly impact the business.

Traditional 401(k) Plans: Flexibility with Higher Burden

Traditional 401(k) plans offer full control over plan design—everything from eligibility and vesting schedules to investment lineups. They also allow employers to choose recordkeepers and advisors independently, which can be attractive for larger organizations with in-house HR resources.

However, this flexibility comes with high administrative burdens, including:

Compliance testing
Form 5500 filings
Fiduciary liability under ERISA

For smaller plans, fees are often higher due to the lack of scale.

Pooled Employer Plans (PEPs): Simplicity and Scale

PEPs, on the other hand, deliver cost savings and simplicity by pooling multiple employers together under one structure.

The Pooled Plan Provider (PPP) assumes fiduciary responsibility and manages:

Compliance and reporting
Annual audits
Regulatory oversight

This reduces employer liability and relieves HR teams of administrative pressure.

PEPs also provide access to institutional-quality investments that may otherwise be out of reach for smaller companies—improving the employee experience with lower costs and modern technology.

Key Trade-Offs to Consider

There are trade-offs:

PEPs may offer less customization in plan design.
Some businesses prefer the independence of managing a standalone plan.

However, with SECURE Act 2.0 expanding pooled plan adoption and requiring automatic enrollment for new 401(k) plans, the PEP model is becoming increasingly favorable for small and mid-sized businesses.

The Apex Consulting Approach

At Apex Consulting, we analyze both options side by side, considering:

Cost efficiency
Fiduciary liability
Employee outcomes

For many employers, the clear winner is the PEP—delivering efficiency, cost savings, and reduced fiduciary risk while helping employees save more effectively for retirement.