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 <a href="https://www.irs.gov/retirement-plans/plan-sponsor/401k-plan-termination" rel="noopener ugc nofollow" target="_blank">terminate their plan</a> when it no longer suits their business needs. Terminating most 401(k) plans is a <a href="https://www.irs.gov/retirement-plans/terminating-a-retirement-plan" rel="noopener ugc nofollow" target="_blank">straight-forward process</a>. A notable exception is <a href="https://www.employeefiduciary.com/blog/pooled-employer-401k-plans" rel="noopener ugc nofollow" target="_blank">Pooled Employer Plans (PEPs)</a> — 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 <a href="https://www.federalregister.gov/documents/2020/11/16/2020-25170/registration-requirements-for-pooled-plan-providers" rel="noopener ugc nofollow" target="_blank">Pooled Plan Provider (PPP)</a> for PEPs. <a href="https://medium.com/@ericdroblyen/good-luck-escaping-a-pooled-employer-401-k-plan-pep-c59f75cfde97">Website</a>