Good Luck Escaping a Pooled Employer 401(k) Plan (PEP)

While 401(k) plans must be established with the intention of continuing indefinitely, the IRS does allow employers to terminate their plan when it no longer suits their business needs. Terminating most 401(k) plans is a straight-forward process. A notable exception is Pooled Employer Plans (PEPs) — a form of “open” Multiple-Employer Plan that pools the 401(k) assets of unrelated employers. This distinction can impose serious hardships on plan participants.

PEPs are a problem because employers lack the power to terminate their portion. 401(k) plans can only be terminated by their sponsor. That means the employer for single-employer plans and the Pooled Plan Provider (PPP) for PEPs.

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Good Luck Escaping a Pooled Employer 401(k) Plan (PEP)

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