Smart USA has exited the pooled employer plan business, opting to focus its resources on managed accounts and retirement technology where the company is emerging as a market leader, said Duane Bernt, CEO of Smart USA and managed account provider Stadion Money Management.
It was strategically difficult to get to the scale needed to be successful in the PEP market, Bernt said of the company’s PEP-related fiduciary oversight business.
Todd Lacey, chief revenue officer for both Smart and Stadion, added that the company — a subsidiary of London-based digital record keeper Smart — managed to attract a “handful of plan adopters” since it launched the business in 2022.
“That was going to be difficult to grow,” Lacey said, noting that some PEPs in the U.S. have surpassed $1 billion in assets.
Aon’s PEP, for example, has some 100 employers and has gathered more the $3 billion in assets and commitments since its launch in 2021.
With that kind of competition, Smart’s managed account businesses — namely Stadion and ProManage — had much better growth prospects, Bernt and Lacey said. The two businesses combined have $8.5 billion in assets under management and serve more than 4,000 plan sponsors and 170,000 plan participants.
“That is a scaled, thriving business, and we’d rather focus our resources there than to try to scale in a third business,” Bernt said.
The company’s decision at the end of December to abandon the PEP business is the final chapter in the company’s initial, more ambitious quest to build a record-keeping platform that catered to pooled employer plans in the U.S.
When the company entered the U.S. market in 2020, it quickly learned that building a record-keeping platform for the U.S. market was a complex matter, even with its experience providing record-keeping services around the world.
“It was more complicated than originally thought,” Bernt said, explaining that other countries didn’t offer the variety of plan features seen in the U.S., such as catch-up contribution and loans.
“There are other geographies that don’t allow loans and don’t have compliance testing,” Bernt said.
In 2022, the company dropped plans to serve as a record keeper to PEPs and instead serve as the pooled plan provider, the entity that manages and administers a pooled employer plan. The plan sponsors that it served in this capacity will remain with their record keepers but will have new PPP oversight, Bernt said.
Even though it is exiting the pooled plan business, the company is optimistic about the prospect for PEPs in the U.S.
“There haven't been that many that have gained traction, but there have been some,” Lacey said of PEPs in the U.S. “If an organization is committed to distributing a PEP and has the distribution infrastructure to get out there and really promote a solution, I think it can be successful.”