Employee Fiduciary Urges DOL to Nix PEP Safe Harbor
Small business 401(k) plan provider Employee Fiduciary is asking the Department of Labor (DOL) to dismiss a regulatory safe harbor that would transfer small businesses into pooled employer plans (PEPs).
The provider is instead asking the DOL’s Employee Benefits Security Administration (EBSA) to implement a single-employer 401(k) safe harbor, adding that small employers can meet its “low-cost and transparency standards…without ceding control of plan design.”
While PEPs were originally formed for small employers wanting to offer plans at affordable rates, Employee Fiduciary argues that the benefit comes with several risks, claiming that it encourages “asset-based fees that rise automatically with plan growth,” “plan provisions that reduce flexibility in matching formulas, eligibility, and vesting,” “conflicted investment menus where providers promote proprietary or high-cost products,” and “difficult exist processes” that deter employers from leaving a pooled arrangement.
In its letter, the firm cites a 2024 review of fee disclosures by the U.S. Government Accountability Office. According to the review, the GAO listed transparency, rather than pooling, as the primary driver of lower 401(k) costs over the last decade.
“PEPs are marketed on two headline promises—lower fees and less employer liability. In practice, those claims distract from the real goal: control. Providers can abuse this control by standardizing terms, steering investment menus, and embedding revenue streams,” said Eric C. Droblyen, CEO and owner of Employee Fiduciary. “Small employers don’t need a pooled plan to get fairness and scale—they need clear, auditable rules that lock in low costs and eliminate conflicts. Our proposal does that.”
Rather than construct a PEP, Employee Fiduciary asks that the DOL consider implementing a safe harbor built on “low-cost index funds, flat per-participant fees, and clear fee disclosures.”
If EBSA were to incorporate a PEP safe harbor, Employee Fiduciary notes that “strong” consumer protections would be necessary, including an all-in fee disclosure in dollars and percentage of assets, a one-page checklist aligned to PEP data filings, and exit rights for employers wanting to leave PEPs, among other protections.
Employee Fiduciary is a provider of low-cost 401(k) plans for small to medium-sized businesses (SMBs). The company serves over 5,000 small businesses and 145,000 participants nationwide.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
