So far, a handful of big firms — Aon PLC, Paychex Inc., Principal Financial Group, Mercer and Mesirow Financial Holdings Inc. — have either launched or announced plans to launch PEPs this year. Smaller entities have also plunged into the fledgling market, including The Platinum 401k Inc., the marketing arm of the $450 million Clearwater, Fla.-based third-party administration firm American Pension Services LLC.
The new pooled 401(k) plans, which in keeping with the SECURE Act started rolling out on Jan. 1, give employers in unrelated businesses a big incentive to pool their assets since they no longer need to file separate Form 5500s and conduct separate annual audits as previously required. They are also expected to reduce sponsors' fiduciary and administrative duties and reduce plan costs through greater economies of scale.
Some in the industry think that the anticipated benefits will appeal to more than small employers unable to offer their own retirement plans, the segment the SECURE Act legislation was intended to help. Some are betting that the plans will set off an era of 401(k) consolidation as existing plan sponsors drop their stand-alone 401(k)s to join the new pooled plans.
While massive plan consolidation may at some point materialize, prospective providers for now appear to be staying put, according to industry observers.
"I think a lot of potential providers are waiting to see what happens with the early rollouts," NEPC's Mr. Bremen said. "They want to see whether the early movers will have success."
Potential pooled plan providers certainly haven't been in a hurry to register with the DOL since the agency opened its registration database in November. As of Jan. 4, 31 companies had registered as pooled plan providers, a sliver of the 3,233 providers the DOL estimates could potentially join the PEP market.
Providers are waiting on additional direction from regulators, including, for instance, a "blessed prototype" from the IRS that's qualified, Mercer's Mr. Traverse said.
"That would kind of be the stake in the ground that we would want before we would put someone in a PEP," he said.
Many are also waiting for guidance from the DOL on the use of proprietary products in the plans and other potential conflicts of interest for which prohibited transaction exemptions might be needed.
"The reason why you haven't seen more folks registering is because they're still lacking the exact guidance on how PEPs are going to operate," Mr. Traverse said.
Industry observers say that guidance is expected to come under the new administration of President Joe Biden, although the timing remains uncertain.
As providers sit on the sidelines, plan sponsors are showing no more than tepid interest in the plans. In a survey of more than 700 401(k) sponsors conducted by Cerulli Associates in October, only 6% said they were very interested in joining pooled plans.
"Only a small portion actually give it some level of interest in perhaps joining a PEP moving forward," said Shawn O'Brien, a senior analyst at Cerulli in Boston.
The lack of enthusiasm may be due in large part to unfamiliarity with the new plans, particularly among small employers, added Anastasia Krymkowski, a Boston-based associate director in Cerulli's retirement group.
Small business owners, she said, are unlikely to spend "a huge chunk of their time thinking about their different retirement plan options, and if their adviser hasn't decided whether they're going to participate in the PEP market, they're going to be hesitant to recommend it."
Joni Tibbetts, vice president of product management in retirement and income solutions at Principal in Des Moines, Iowa, echoed similar views, saying there will be a "learning curve" for plan sponsors. "I don't know yet if we know that these things are going to explode or what the take-up is on these given that it is a brand new concept in the marketplace," she said.
Some industry observers wonder whether the plans will live up to their purported benefits. For them, the big question is whether they will build scale fast enough to offer competitive pricing against a single-employer plan or even a bundled small plan option.
"I don't think it's necessarily a given that PEPs are going to be cheaper and better and faster," Cerulli's Ms. Krymkowski said.