"They tend to be growing companies that are involved in a lot of mergers and acquisitions," said Rick Jones, senior partner in Aon's wealth solutions group, in an interview.
Some of the companies are established companies while others are spinoffs looking for an "easy, low- or no-cost way" to provide 401(k) benefits to their workforce, Jones said.
Jones said employers see the PEP as a way to lower their 401(k) costs, reduce their workload and potentially cut their fiduciary risk.
Some employers "might be particularly concerned about the amount of work it's taking them to manage and operate" a stand-alone 401(k) plan, while others "see the inherent cost savings" of joining the pooled plan.
Jones estimates that participating employers in the PEP that ditched their stand-alone 401(k) plans are seeing average cost savings of 41%, savings that bolsters employees' retirement balances by up to 11% over their career.
Aon's PEP costs 20 to 30 basis points "all in," which includes a per-participant charge as well as investment management, fiduciary services, record-keeping and audit fees, Jones said.
Pooled employer plans such as Aon's are a relatively new type of plan that began coming online on Jan. 1, 2021, thanks to the SECURE Act, which greenlighted their creation. The new pooled plans give employers in unrelated businesses the opportunity to combine their 401(k) plans into a single pooled plan so as to lower their costs through economies of scale.
Aon has long trumpeted its belief in the power of pooled employer plans to reduce costs and lower an employer's fiduciary and administrative responsibilities. "We expect more than half of U.S. employers to merge their traditional 401(k)s into pooled employer plans by 2030," Jones said, adding that the firm "stands by its prediction."