The pooled employer plan (PEP) market is in the midst of a rapid expansion.
According to Cerulli Associates, the number of PEPs more than tripled between 2021 and 2024, and adoption continues to accelerate, particularly among smaller employers who find the administrative and cost burden of sponsoring a standalone 401(k) plan prohibitive.
But that speed of adoption has generated a persistent and consequential misunderstanding that joining a PEP transfers fiduciary responsibility away from the employer entirely.
Cost savings and the prospect of reduced fiduciary liability are likely driving much of the momentum, she says, but no single employer segment is leading the charge.
"I am not seeing any particular class of business or segment leading the charge, but I am aware of at least two school systems that have created or explored a pooled employer plan," Von Wald said.
That breadth of interest underscores how widely the PEP value proposition resonates. For employers who have historically found independent plan sponsorship too expensive or too complex, the structure offers a path into a 401(k) arrangement without standing up the full administrative infrastructure alone.
The risk, Von Wald argues, is that many are signing on without fully understanding what they are (and are not) giving up.
Much of the confusion, Von Wald says, originates in how PEPs are sold.
"Promotional materials tend to highlight reduced fiduciary liability without equally emphasizing the responsibilities that remain with the employer," she said. "Because each PEP is structured differently, it is difficult to pinpoint a single source of the confusion, but the gap between what is promoted and what the agreement actually requires is a consistent theme."
The legal reality is unambiguous. The 2019 SECURE Act amendments to the Employee Retirement Income Security Act (ERISA) that enabled PEPs specify that individual employers still retain fiduciary responsibilities.
Under ERISA Section 3(43)(B)(iii)(I), as cited in the Department of Labor's (DOL) Proposed Rules for PEPs, each participating employer retains fiduciary responsibility for selecting and monitoring the pooled plan provider (PPP) and any other named fiduciary.
Under ERISA Section 3(43)(B)(iii)(II), employers also retain fiduciary responsibility for the investment and management of plan assets attributable to their own employees, to the extent that function has not been formally delegated to another fiduciary by the PPP.
ERISA further requires that employers retain the ability to administer the plan, review required disclosures and exit the PEP without being subject to unreasonable restrictions.
Once an employer joins, Von Wald emphasizes, the ongoing duty to monitor the PPP remains. "While that may not be a day-to-day monitoring effort, it does include periodic reviews of the PEP's operations and performance, as well as oversight of any employee complaints and their resolution," she said.
The DOL's July 2025 guidance reinforced that prudently selecting and monitoring the PPP is itself a core fiduciary duty that stays with the employer.
For Von Wald, the benchmark for what that looks like is familiar: it should closely resemble how a plan sponsor monitors its own 401(k) plan and service providers.
"That means understanding and benchmarking fees, routinely reviewing the performance of the investment options offered, identifying poor performers, and examining embedded fund expenses," she said. "Employers should also be reviewing the management, overall performance, and cost structure of the PPP."
The litigation analogy is deliberate. "The same types of allegations that have driven litigation against traditionally sponsored 401(k) plans – excessive fees, imprudent investment selection, and inadequate monitoring of service providers – apply equally in the PEP context, particularly when first joining," Von Wald said. "Participating employers should be actively evaluating each of these areas."
This connects directly to the broader wave of fiduciary risk management challenges that now extend well beyond retirement plans, as plan sponsors face scrutiny across a widening range of benefit decisions.
The DOL's July 2025 guidance also set out nine practical tips for small employers evaluating PEP participation:
When something goes wrong inside a PEP, the allocation of financial exposure is not predetermined.
"Where liability lands depends heavily on the specific PEP agreement, so employers should read it in full before signing – paying particular attention to any indemnification obligations they owe to the pooled plan provider, since those provisions can significantly affect where financial exposure ultimately lands if something goes wrong," Von Wald said.
Benefits brokers advising employer clients on retirement plan structures should be helping plan sponsors work through those indemnification provisions before any agreement is executed.
As Von Wald notes, this is also an area where fiduciary liability coverage considerations for 401(k) plan sponsors remain directly relevant – PEP participation does not eliminate the need for that coverage; it reshapes where the exposure sits.
The DOL's 2025 guidance also signaled the possibility of a fiduciary safe harbor for participating employers. Von Wald is cautious about how much weight plan sponsors should place on that prospect.
"Safe harbors can be helpful, but only if their conditions are fully satisfied – a safe harbor that is not carefully followed provides little real protection," she said.
There is also a broader legal dimension: in the wake of Loper Bright Enterprises v. Raimondo, the 2024 Supreme Court decision that curtailed judicial deference to agency rulemaking, any safe harbor issued by the DOL could face a challenge on the grounds that it exceeds the agency's statutory authority.
"And historically, safe harbors have sometimes worked against fiduciaries, with plaintiffs using the safe harbor's own standards as a road map to argue that a fiduciary fell short under ERISA," Von Wald added.
One of the most underappreciated dimensions of PEP fiduciary risk, Von Wald argues, is organizational: the gap between who is named as the fiduciary and who is actually making decisions.
"This is where an employer's understanding of the distinction between settlor acts and fiduciary acts becomes critical," she said.
Settlor acts – plan design, funding decisions, plan termination – are traditionally distinct from fiduciary acts, which flow from those decisions as the fiduciary takes the steps necessary to carry them out. The danger is that individuals several layers removed from the named fiduciary may be making or influencing decisions that carry fiduciary implications without appreciating that exposure.
"Fiduciary training is always a sound investment," Von Wald said. "It ensures that everyone involved understands their role, how their decisions and actions can give rise to liability, and what standards they are expected to meet."
This accountability gap is particularly acute for smaller employers newly joining a PEP, where HR and finance staff may not have had prior exposure to ERISA fiduciary standards. Brokers who help these clients understand that the DOL's evolving rules on retirement plan alternatives carry ongoing compliance obligations will be adding meaningful value well beyond the placement itself.
For Von Wald, the PEP structure remains a genuinely useful tool when it is properly understood and vetted.
"When properly assessed and vetted, PEPs can be a genuinely useful tool in that environment, and employees ultimately benefit as well," she said.
But she is equally direct about the limits of what the structure can offer.
"Regardless of what a PEP agreement says, an employer cannot off-load all of its fiduciary duties to a PPP or any other service provider. Joining a PEP is not a set-it-and-forget-it decision. The fiduciary duty to monitor is ongoing, and that obligation extends to any changes in the PEP agreement, including shifts in investment options, expenses, or services provided."
In a market growing as quickly as the PEP space, ensuring that employers understand exactly what they are and are not transferring when they sign on may be among the most important conversations benefits brokers have with their clients in 2026.
