Morningstar Investment Management and Plan Administrators Inc., a retirement plan administrator and record keeper, on Tuesday launched a pooled employer plan featuring an investment menu made up almost exclusively of ESG funds.
The launch comes more than a year after the companies announced their intention to offer the pooled plan, one that they're positioning as the nation's first to focus on ESG investments.
The Morningstar ESG Pooled Employer Plan offers ESG-focused funds across all asset classes, including a target-date fund leveraging all the investments in the plan. The lineup also includes asset classes such as TIPs and money market funds for which no ESG investment option exists.
The objective is to create "as complete of an ESG lineup as possible," said Brock Johnson, president of Morningstar's Global Retirement and Workplace Solutions, in an email.
The launch follows the Department of Labor's final rule in November regarding the use of ESG investments in workplace retirement plans and comes amid political polarization over ESG investing in public pension plans.
"Every employer will need to evaluate whether this type of lineup makes sense for their employees," Mr. Johnson said in the email. "If ESG risk can have a material impact on a fund's performance, then it makes sense that it be considered as part of the overall investment selection process."
Plan Administrators, based in De Pere, Wisc., will oversee the plan as the pooled plan provider, while Chicago-based Morningstar will select and manage the investment lineup for the plan as the 3(38) investment manager, the fiduciary that oversees plan lineups.
The Morningstar PEP charges employers a one-time setup fee of $390 and a monthly $200 administration fee. In addition, employees pay a $4 monthly record-keeping fee on top of an annual custodial and trading fee of 7 basis points and an annual investment advisory fee of 25 basis points.
Pooled employer plans are a relatively new type of retirement plan that allows employers in unrelated businesses to band together to offer a single "pooled" plan. They are being touted as a way for employers to reduce their fiduciary and administrative duties and reduce plan costs through greater economies of scale. Pooled plan began rolling out in 2021, following the enactment of the SECURE Act, which facilitated the creation of the new plans.
"With the rollout of PEPs, there is now a vehicle available that can help to reduce some of the employer's fiduciary responsibilities, making it easier for small business owners to offer a 401(k) to their employees, said Amy Hermann, director of sales and marketing at Plan Administrators.
