Employers juggling compliance deadlines, mounting paperwork, and growing service fees often find that traditional single-employer 401(k) plans strain internal resources and leave little leverage to negotiate lower costs. ERISA’s strict reporting requirements, nondiscrimination testing, and annual Form 5500 filings can become time-consuming liabilities—and each regulatory misstep carries potential penalties.
Group 401(k) plans offer a strategic alternative by pooling assets across multiple sponsors to unlock economies of scale, trimming recordkeeping and investment fees by as much as 32%–65% while shifting key fiduciary responsibilities to a dedicated pooled plan provider. This model delivers administrative efficiency, professional oversight, and significant mitigation of fiduciary liability—all without sacrificing the tax advantages of a traditional 401(k).
This guide provides actionable, unbiased insights to help you determine whether a group 401(k) is right for your organization. Here’s what you’ll find:
- A clear definition of group 401(k) plans and how they differ from single-employer arrangements
- An overview of major plan structures, including multiple employer plans, pooled employer plans, controlled group plans, and association retirement plans
- A balanced look at benefits and trade-offs, from cost savings and streamlined compliance to setup complexity and uniform plan design
- A step-by-step roadmap for establishing a group 401(k), with practical tips on documentation, provider selection, and employee enrollment
- An outline of ERISA and IRS requirements, plus best practices for ongoing governance and vendor oversight
- Guidance on evaluating and comparing service providers, including questions to ask and key selection criteria
- Answers to frequently asked questions about group 401(k) implementation and maintenance
Whether you’re leading benefits at a small business or managing retirement plans for a growing organization, this resource will equip you to navigate the process with confidence and secure a cost-effective, compliant solution for your employees.
What Is a Group 401(k) Plan?
Group 401(k) plans bring together multiple employers under a single retirement plan document, creating a unified platform for administration, investment management, and compliance oversight. By leveraging the scale of pooled assets, participating businesses can tap into lower fees, streamlined reporting, and enhanced fiduciary support, all while preserving the tax-advantaged status afforded by ERISA and the Internal Revenue Code.
Definition of a Group 401(k) Plan
A group 401(k) plan is a tax-qualified retirement savings arrangement sponsored jointly by two or more unrelated employers. Unlike a traditional plan that serves just one company, a group 401(k) consolidates administrative tasks, investments, and fiduciary duties under one umbrella. This model remains subject to ERISA’s rules and IRS guidelines, offering employees the same pre-tax contribution benefits and potential for tax-deferred growth. If you need a refresher on core mechanics, learn the basics of how 401(k) plans work.
How Group 401(k) Plans Operate
Under a group 401(k), a Pooled Plan Provider (PPP) or third-party administrator (TPA) takes on the bulk of administrative and fiduciary responsibilities. They handle day-to-day tasks—everything from nondiscrimination testing and Form 5500 filings to payroll integration and participant communications. Employers share the costs of recordkeeping, compliance checks, and investment oversight, typically on a per-participant or tiered-fee basis. For employees, the experience is seamless: a single online portal, consolidated quarterly statements, and a unified menu of investment options, often featuring institutional-level funds and target-date series.
Key Differences from Single-Employer 401(k) Plans
Group 401(k) plans diverge from their single-employer counterparts in several important ways:
- Plan Document and Governance: One comprehensive document covers all participating employers, reducing the need for separate adoption agreements.
- Form 5500 Filing: Instead of multiple filings, the PPP submits a pooled Form 5500 on behalf of the entire group.
- Shared Fiduciary Duties: Employers delegate significant responsibilities to the PPP or TPA, though they retain oversight of provider selection and monitoring.
- Fee Structure: Costs are spread across the group, often unlocking lower recordkeeping and investment fees than a standalone plan.
- Investment Menu Consistency: All participants choose from the same fund lineup, ensuring uniformity but limiting employer-level customization.
Consider mapping these features side-by-side against a single-employer plan to clarify which model best fits your organization’s needs.
Types of Group 401(k) Plans
Group 401(k) plans aren’t one-size-fits-all. Depending on your organization’s structure and goals, you may choose from several plan types—each with unique requirements, benefits, and governance models. Here’s a quick rundown:
Multiple Employer Plans (MEPs)
A Multiple Employer Plan (MEP) allows two or more unrelated employers to participate in a single 401(k) plan.
- Definition: Employers pool assets under one plan document, sharing recordkeeping, compliance testing, and fiduciary duties.
- Pros: Cost sharing often drives lower per-participant fees and reduced administrative work for each sponsor.
- Cons: Without a dedicated Pooled Plan Provider (PPP), each employer can be jointly liable for fiduciary breaches by any single sponsor.
Pooled Employer Plans (PEPs) Under the SECURE Act
Pooled Employer Plans (PEPs) are a modern variant of the MEP, authorized by the SECURE Act, in which a PPP assumes most fiduciary and administrative responsibilities.
- Definition: A PEP is established and maintained by a PPP, relieving individual employers of liability for day-to-day plan operations and investment oversight.
- Eligibility: Any unrelated employer can join, provided they sign the PPP’s adoption agreement.
- Structure: One Form 5500 covers all participating employers, and the PPP handles nondiscrimination testing, payroll integration, and participant communications.
- Learn more about PEP requirements on the IRS website: https://www.irs.gov/retirement-plans/pooled-employer-plans-peps-under-the-secure-act.
Controlled Group 401(k) Plans
Controlled group plans treat a set of commonly owned or affiliated businesses as a single employer for retirement plan purposes.
- Parent-Subsidiary Group: One company owns at least 80% of another.
- Brother-Sister Group: Five or fewer owners share at least 80% common ownership and at least 50% identical ownership across entities.
- Combined Group: Three or more companies linked by a mix of parent-subsidiary and brother-sister relationships, with at least one overlapping member.
By grouping under common ownership, companies can operate either a single plan covering all employees or maintain separate plans while still conducting pooled compliance testing.
Association Retirement Plans (ARPs)
Association Retirement Plans (ARPs) are sponsored by trade associations, chambers of commerce, or other professional groups.
- Definition: Eligible member employers join under one plan document, gaining access to pooled investments and standardized administration.
- Governance: The sponsoring association typically oversees eligibility rules, plan design parameters, and vendor selection.
- Ideal for: Small businesses in the same industry or geography that want to offer a competitive retirement benefit without individual plan setup.
Other Emerging Structures
As retirement plan innovation continues, you’ll also encounter:
- Multiple Employer Aggregation Programs (MEAPs): Similar to MEPs but often focused on specific advisor or broker networks that aggregate plan assets.
- Industry-Specific Coalitions: Groups of companies within a niche vertical (for example, healthcare or hospitality) forming a custom plan to address unique workforce needs.
Choosing the right type of group 401(k) plan hinges on your organization’s size, ownership structure, appetite for shared fiduciary risk, and desired level of governance. In the next sections, we’ll explore the benefits, potential trade-offs, and a step-by-step setup guide to help you make an informed decision.
Key Benefits of Group 401(k) Plans
Group 401(k) plans pack a powerful punch for both employers and employees. By coordinating resources and centralizing administration, these plans deliver measurable advantages that extend far beyond traditional single-employer arrangements.
Cost Savings through Economies of Scale
Pooling assets creates instant buying power. When dozens—or even hundreds—of employers combine their participant balances, recordkeeping and investment fees shrink dramatically. It’s not uncommon for plan sponsors to see fee reductions in the range of 32%–65%. Lower expenses translate directly into higher take-home pay for employees and better net returns over time.
Administrative Efficiency
Imagine handing off your biggest paperwork headaches to a specialized team. With a group plan, you don’t just share costs—you share the workload.
- Compliance testing and Form 5500 filings get handled by your Pooled Plan Provider (PPP) or TPA.
- Payroll integration is configured once and rolls through every pay period.
- Participant communications—enrollment kits, quarterly statements, regulatory notices—are all automated.
That means your HR or finance staff can spend less time on retirement‐plan minutiae and more time on strategic initiatives.
Expanded Investment Options
Larger asset pools unlock access to institutional-class funds and model portfolios that might be out of reach for smaller standalone plans. Participants often benefit from:
- Lower expense ratios on indexed and active funds
- Professionally managed target-date series
- Curated model portfolios that match varying risk tolerances
This breadth of choice can help employees tailor their retirement strategy without juggling multiple platforms.
Enhanced Employee Experience
A streamlined, modern user interface can boost engagement and deferral rates. With a group 401(k), participants enjoy:
- One unified portal for enrollment, contribution elections, and account tracking
- Consolidated, easy-to-read statements that cover every employer in the plan
- Mobile access for on-the-go account management
Simpler enrollment processes, coupled with high-quality digital tools, tend to drive higher sign-up percentages and encourage employees to save more over the long haul.
Professional Fiduciary Oversight
One of the biggest risks in running a 401(k) is fiduciary liability. Group plans let you delegate core responsibilities—investment selection, ongoing monitoring, and compliance—to seasoned professionals. By choosing a PPP or appointing a 3(16) administrative fiduciary and a 3(38) investment manager, you dramatically reduce your exposure. If you’d like to learn how we can help, explore our fiduciary services for detailed information on delegation and oversight.
Drawbacks and Key Considerations for Employers
Even with robust benefits, group 401(k) plans come with their own set of trade-offs. Understanding these pitfalls can help you decide if a pooled approach aligns with your organization’s goals and resources. Below, we explore the main challenges and suggest strategies to address them.
Initial Setup Complexity
Launching a group plan demands more upfront legwork than a traditional single-employer arrangement. You’ll need to:
- Coordinate legal documentation such as the prototype plan, adoption agreement, and Summary Plan Description (SPD).
- Draft or review a PPP agreement outlining service levels, fee structures, and fiduciary roles.
- Ensure association bylaws or inter-employer agreements permit the pooling of assets and member participation.
While a capable Pooled Plan Provider or TPA can streamline this process, plan sponsors should anticipate a detailed kickoff phase involving multiple stakeholders and legal reviews.
Reduced Plan Design Flexibility
Group plans trade customization for uniformity. All participating employers must adopt identical plan features, including:
- Eligibility criteria (service and age requirements)
- Vesting schedules for employer contributions
- Matching or profit-sharing formulas
This one-size-fits-all approach means you can’t tweak provisions to suit individual company cultures or compensation strategies. If your business values bespoke benefits design, a group plan may feel unduly restrictive.
Potential for Additional Audit Requirements
Under ERISA, retirement plans with 100 or more participants at the beginning of the plan year typically require an annual independent audit. Because group plans pool employees across multiple employers, participant counts can escalate quickly. As a result:
- You may face higher audit fees and more coordination between employers, auditors, and the PPP.
- Preparing for the audit demands meticulous record-keeping and cooperation among all plan sponsors.
To avoid surprises, track participant totals regularly and budget for audit expenses as your group plan grows.
Fiduciary Oversight and Liability
Although group structures allow you to delegate many fiduciary tasks, some exposure remains—especially if you opt for a MEP without a dedicated PPP. Key considerations include:
- Shared Liability: In a traditional MEP, each employer can be held responsible for others’ fiduciary breaches.
- Mitigation Strategies:
- Engage a Pooled Plan Provider or 3(16) administrative fiduciary to shoulder daily operations.
- Purchase fiduciary liability insurance to guard against potential lawsuits.
- Conduct regular vendor due diligence and document oversight activities in meeting minutes or decision logs.
Clearly defining roles and maintaining strong governance practices will help keep liability in check.
Impact on Employee Perception
A unified plan design can simplify administration, but it may not resonate equally with all employee groups. Common concerns include:
- Limited Customization: Employees at one company might prefer a different vesting schedule or matching formula than those at another.
- Communication Challenges: Explaining pooled fees, governance, and plan rules requires clear, consistent messaging.
To address these issues, develop targeted communication strategies—such as company-specific kickoff sessions or tailored FAQs—that acknowledge each employer’s unique culture while reinforcing the benefits of scale.
By weighing these drawbacks alongside the cost savings and administrative relief offered by group 401(k)s, you can determine whether the model fits your organization’s priorities and resources. Next, we’ll look at the regulatory and compliance requirements that govern these plans.
Regulatory and Compliance Requirements
When you join or sponsor a group 401(k), you step into a world of ERISA and IRS mandates designed to protect participants and preserve tax-favored status. Navigating these rules may seem daunting, but understanding the key requirements will keep your plan on solid ground.
ERISA’s Core Requirements
The Employee Retirement Income Security Act (ERISA) sets the foundation for fiduciary conduct, prohibited transactions, and disclosure obligations:
- Fiduciary Duties: Every appointed fiduciary owes a duty of loyalty (acting solely in participants’ best interests) and prudence (sensible, well-informed decision-making). They must diversify plan investments and adhere strictly to the plan document.
- Prohibited Transactions: ERISA bars certain deals—such as self-dealing or transactions between the plan and a party in interest. Violations can trigger excise taxes and personal liability.
- Reporting and Disclosure: Plan sponsors must furnish a Summary Plan Description (SPD) within 90 days of joining and an updated version every five years (or every ten years if there have been no material changes). Annual participant fee disclosures and quarterly benefit statements are also required.
Nondiscrimination and Coverage Testing
Even pooled plans must prove that benefits don’t favor highly compensated employees (HCEs):
- ADP/ACP Testing: Automatic deferral percentage (ADP) and automatic contribution match (ACP) tests ensure that HCEs don’t outpace non-HCEs in elective deferrals or matching contributions.
- Top-Heavy Rules: Plans where key employees hold more than 60% of assets must meet minimum contribution and vesting requirements for non-key participants.
- Group Pooling Impact: For MEPs and PEPs, testing is performed on the combined population, which often improves results thanks to a larger, more diverse employee base. If you’ve established separate lines of business under the plan, each segment may test independently, provided IRS criteria are met.
Form 5500 Filing for Group Plans
A single Form 5500 covers all participating employers in a pooled arrangement:
- Unified Filing: The Pooled Plan Provider (PPP) or designated TPA typically prepares and files the Form 5500 with the Department of Labor (DOL) and IRS by the last day of the seventh month after plan year-end (for a December 31 plan, that’s July 31).
- Extensions and Penalties: You can request a 2½-month extension with Form 5558. Late filings incur daily DOL fines—up to $2,259 per day as of 2025—so a reliable calendar and early coordination with your provider are essential.
- DOL Guidance: For detailed instructions and penalty schedules, see the DOL’s Form 5500 resource page: https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500
SECURE Act Provisions
The SECURE Act ushered in two major changes for pooled plans:
- Removal of the “One Bad Apple” Rule: Unrelated employers can now join MEPs without risk that one sponsor’s compliance failure disqualifies the entire plan.
- Creation of Pooled Employer Plans (PEPs): PEPs allow any unrelated employer to tap into a PPP, shifting fiduciary and administrative duties—such as nondiscrimination testing and Form 5500 filing—away from individual sponsors.
Documentation and Plan Amendments
Staying compliant means keeping your paperwork in order and up to date:
- Core Documents:
- Prototype or Master Plan Document
- Adoption Agreement (for each employer)
- Summary Plan Description (SPD)
- Pooled Plan Provider (PPP) or TPA Service Agreement
- Mandatory Amendments:
- SECURE Act restatements and safe-harbor amendments typically have IRS-defined deadlines (often within two plan years of enactment).
- Other legislative changes—such as CARES Act distributions or SECURE 2.0 provisions—require timely plan text updates and participant notices.
By aligning your group 401(k) with these ERISA and IRS requirements—and leaning on an experienced PPP or TPA—you’ll safeguard participants, reduce liability, and preserve the tax advantages that make retirement plans so powerful.
Fiduciary Roles and Responsibilities in Group Plans
The success of any group 401(k) hinges not only on cost efficiencies and streamlined administration but also on clear lines of fiduciary responsibility. Under ERISA, several parties share duties to act solely in participants’ best interests and ensure the plan runs smoothly. Below is a breakdown of key fiduciary roles you’ll encounter in a group plan.
Plan Sponsor Fiduciary Duties
Each participating employer—often referred to as a plan sponsor—retains certain core fiduciary obligations, even when joining a pooled arrangement. Those duties include:
- Selecting and monitoring the Pooled Plan Provider (PPP) or TPA: Sponsors must conduct thorough due diligence, benchmark fees, and document the selection process.
- Overseeing plan design decisions: Employers approve eligibility requirements, vesting schedules, and employer contribution formulas.
- Reviewing performance: Regularly evaluate PPP or TPA performance against service-level agreements, track compliance calendars, and document any corrective actions.
Maintaining a clear audit trail—minutes from committee meetings or decision logs—helps demonstrate you’ve fulfilled these responsibilities.
Pooled Plan Provider (PPP) Responsibilities
Under the SECURE Act, a PPP takes on the lion’s share of day-to-day fiduciary tasks in a Pooled Employer Plan (PEP). Key obligations include:
- Administration and Recordkeeping: Handling enrollment, contribution processing, nondiscrimination testing, and the pooled Form 5500 filing.
- Compliance Oversight: Ensuring plan provisions meet ERISA and IRS requirements, issuing participant notices, and implementing mandatory plan amendments (e.g., SECURE Act restatements).
- Participant Communications: Distributing Summary Plan Descriptions, fee disclosures, and quarterly statements.
By centralizing these duties, the PPP helps limit individual sponsors’ liability and simplifies ongoing governance.
Section 3(16) Administrative Fiduciary
When a PPP or TPA accepts designation as a 3(16) administrative fiduciary, they assume statutory responsibility for daily plan operations. Typical 3(16) tasks include:
- Processing loans and hardship distributions in accordance with plan rules and regulatory requirements.
- Preparing and filing government forms, including Form 5500 and Form 8955-SSA (participant-level reporting).
- Managing vendor relationships and ensuring data accuracy for payroll feeds and participant records.
Outsourcing these chores to a qualified 3(16) fiduciary can free plan sponsors from much of the administrative grind.
Section 3(38) Investment Manager
Fiduciary liability around investment selection and monitoring can be daunting. A 3(38) investment manager contractually assumes that burden by:
- Designing and maintaining the plan’s investment lineup, including target-date funds and model portfolios.
- Conducting ongoing due diligence to assess performance, fees, and fund-manager changes.
- Replacing underperforming or high-cost options to maintain a competitive, diversified menu.
Engaging a 3(38) manager ensures participants benefit from professional oversight, and employers can point to clear delegation steps when documenting their fiduciary process.
Section 402(a) Named Fiduciary
ERISA requires a designated Named Fiduciary—often an individual or committee—to take ultimate responsibility for plan governance. The Named Fiduciary typically:
- Makes final decisions on plan amendments, benefit disputes, and termination.
- Ensures that fiduciaries at all levels (sponsors, PPP, 3(16), and 3(38)) adhere to ERISA’s loyalty and prudence standards.
- Reviews plan-level financials and service-provider reports to verify fees and performance remain competitive.
By clearly assigning this role in the plan document, you create a transparent governance framework that helps manage risk and maintain compliance.
With well-defined roles and proper delegation, group 401(k) sponsors can harness the efficiencies of scale without taking on undue fiduciary risk. In the next sections, we’ll explore how fees are structured and walk through a hands-on setup guide.
Cost Structure and Fee Comparison
Understanding the fees behind your retirement plan is critical—both for budgeting and for maximizing returns. Group 401(k) plans typically break costs into four main categories. By pooling assets, these plans can negotiate lower rates and pass substantial savings on to participants.
Administrative and Recordkeeping Fees
Administrative and recordkeeping fees cover the basics: maintaining participant accounts, processing contributions, handling distributions, and preparing Form 5500 filings. Standalone 401(k) plans often charge a flat per-participant fee—commonly $60–$100 per year—or a tiered schedule that declines as headcount grows. Group plans, by contrast, leverage collective scale to push those costs down, frequently landing in the $25–$45 range per employee annually. Over a plan with 200 participants, that difference can translate into $7,000–$11,000 in annual savings.
Investment Management Fees
Investment management fees—or expense ratios—compensate fund managers and cover custodial services. A small single-employer plan might only qualify for retail share classes with average expense ratios of 0.40%–0.60% of assets under management (AUM). When multiple employers combine their assets, they often gain access to institutional or wrap-fee share classes that run as low as 0.15%–0.25% AUM. Over time, shaving just 0.20% off total expense ratios can add thousands of dollars to participant balances.
Advisory and Consulting Fees
Employers sometimes engage fiduciary advisors or ERISA compliance consultants to guide plan design, investment selection, and governance. Fees for these services can range from 0.05% to 0.25% of AUM or $1,500–$5,000 annually on a flat-fee basis. Group 401(k) arrangements often include basic advisory support within the pooled plan provider’s bundled pricing, reducing—or in some cases, eliminating—standalone advisory charges.
Third-Party Service Provider Fees
Beyond day-to-day recordkeeping and investment oversight, third-party providers (such as TPAs, custodians, or PPPs) may levy additional fees for tasks like loan processing, hardship distributions, or custom reporting. A single-employer plan might pay $2,000–$4,000 per year in custodial or TPA charges. A pooled plan provider can negotiate these services at scale, often bundling them into a single, transparent line item that ranges from $1,200 to $2,000 annually—regardless of the number of participating employers.
Illustrative Fee Comparison Table
Below is a hypothetical example contrasting annual costs for a 200-participant plan with $10 million in assets:
| Fee Category | Single-Employer Plan | Group 401(k) Plan |
|---|---|---|
| Administrative & Recordkeeping | $80 per participant | $30 per participant |
| Investment Management | 0.50% of AUM | 0.20% of AUM |
| Advisory & Consulting | 0.15% of AUM | 0.08% of AUM |
| Third-Party Provider (TPA/PPP) | $3,000 flat fee | $1,500 flat fee |
| Total Annual Cost Estimate | $102,000 + $50,000 | $48,000 + $20,000 |
In this scenario, the group 401(k) plan trims more than half of the annual expenses—amounting to over $84,000 in combined savings. While actual fees will vary by provider and plan specifics, this comparison illustrates how pooled solutions can deliver significant cost relief.
Step-by-Step Setup Guide for a Group 401(k)
Launching a group 401(k) plan may seem daunting, but breaking it into clear phases makes the process manageable. Below is a practical roadmap—from confirming eligibility to keeping the plan running smoothly—designed to help you move forward with confidence.
Assess Eligibility and Form a Sponsoring Group
Before you draft a single document, verify that your organization or coalition meets ERISA’s criteria for a pooled plan. Key steps include:
- Review Ownership or Membership Structure
• For Controlled Groups, confirm parent-subsidiary, brother-sister, or combined relationships.
• For Association Retirement Plans, ensure your bylaws allow offering a benefit to member employers. - Establish Sponsorship Agreements
• Draft an inter-employer agreement or association resolution that specifies who can join, voting rights, and membership dues. - Consult Legal and Tax Advisors
• Engage ERISA counsel to validate your plan’s legal footing.
• Map out how contributions, testing, and fiduciary roles will flow across sponsors.
Select the Appropriate Plan Type
With eligibility locked in, choose the structure that aligns with your governance preferences and risk tolerance:
- Multiple Employer Plan (MEP)
• Great for unrelated employers comfortable sharing liability. - Pooled Employer Plan (PEP)
• Ideal if you want to offload most fiduciary tasks to a Pooled Plan Provider (PPP). - Controlled Group Plan
• Suited to common-ownership entities looking for a single plan or coordinated compliance testing. - Association Retirement Plan (ARP)
• Best when a trade association or chamber of commerce wants to sponsor a plan for its members.
List your priorities—cost control, plan design flexibility, liability mitigation—and weigh them against each plan’s features before deciding.
Draft and Adopt Plan Documents
Once you’ve selected the plan type, get your paperwork in order. Common documents include:
- Master or Prototype Plan Document
- Employer Adoption Agreements (one per sponsor)
- Summary Plan Description (SPD) for participants
- Pooled Plan Provider or TPA Service Agreement
- Trust Agreement and Banking Resolution
Work with your PPP or TPA to tailor each document, ensuring consistency in eligibility, vesting schedules, matching formulas, and other core provisions.
Engage and Vet a Service Provider
Your pooled plan’s success hinges on choosing the right administrator and fiduciary partner. Conduct due diligence by:
- Issuing a Request for Proposal (RFP)
• Outline expectations for recordkeeping, compliance testing, participant support, and technology. - Comparing Fees and Service Levels
• Benchmark per-participant rates, investment options, and advisory support across multiple providers. - Checking References and Credentials
• Speak with existing clients to confirm responsiveness and reliability.
• Verify that the PPP holds appropriate ERISA fiduciary bonds or insurance.
Aim to strike the balance between cost savings and the quality of fiduciary oversight.
Execute Adoption and Implementation
With documents signed and a provider in place, move into the technical setup:
- Collect Employer and Employee Census Data
- Upload Payroll Files and Establish Data Feeds
- Open Plan Trust Accounts and Confirm Custodial Arrangements
- Test Contribution Processing in a Pilot Run
- Obtain Plan ID Numbers and Finalize Compliance Calendars
Regular check-ins with your TPA during this phase ensure that nothing falls through the cracks.
Launch Employee Enrollment
Here’s where you get participants on board:
- Develop Communication Templates
• Enrollment invitations, plan highlights, and deadline reminders. - Hold Kickoff Meetings or Webinars
• Walk through the online portal, explain fund choices, and answer questions. - Provide Online Tutorials and Quick-Start Guides
• Short videos or FAQs that demystify contribution elections and beneficiary designations. - Track Election Rates and Follow Up
• Use your PPP’s dashboards to monitor who’s signed up and send targeted reminders.
A well-orchestrated launch drives higher participation and sets the tone for ongoing engagement.
Maintain Ongoing Administration
A group 401(k) requires consistent attention to stay compliant and cost-effective:
- Monitor Compliance Testing and Corrective Actions
• ADP/ACP, top-heavy, and coverage testing typically run on an annual cycle. - File Form 5500 and Related Reports
• Ensure timely submission by the seventh month after plan year-end (or secure an extension). - Conduct Annual vendor and fee reviews
• Compare service levels and expense ratios against industry benchmarks. - Update Plan Documents and Participant Notices
• Incorporate legislative changes (e.g., SECURE Act updates) and distribute revised SPDs. - Hold Quarterly or Semi-Annual Fiduciary Meetings
• Review investment performance, service issues, and upcoming deadlines.
By embedding these tasks into a compliance calendar—and partnering with a trusty PPP or TPA—you’ll keep your group plan on track and participants on pace toward retirement goals.
Best Practices for Managing Your Group 401(k)
Managing a group 401(k) successfully means balancing cost efficiency with a solid governance framework. Even though day-to-day administration can be outsourced to a Pooled Plan Provider (PPP) or TPA, it’s critical to stay proactive. These best practices will help sponsors and committees maintain a well-run plan, minimize risk, and keep participants on track.
Conduct Regular Vendor Reviews and Benchmarking
Your service providers should never be “set and forget.” At least once a year, gather fee and performance data from your PPP, custodial bank, 3(38) manager, and any other key partners. Compare their pricing and service quality against industry benchmarks and alternative providers. Ask yourself:
- Are recordkeeping fees still competitive?
- Do investment options align with current market best practices?
- Is customer support prompt and knowledgeable?
Document these reviews in a vendor scorecard, and use the results to negotiate better terms or to switch providers if needed.
Maintain a Robust Compliance Calendar
Retirement plans live or die by deadlines. Build a centralized calendar that covers:
- Nondiscrimination testing windows (ADP/ACP, top-heavy)
- Form 5500 and extension filings
- SPD and participant notice distribution dates
- Mandatory plan amendment deadlines (SECURE Act updates, safe-harbor elections)
Assign clear ownership for each task—whether that’s a committee member, plan administrator, or external fiduciary—and automate reminders where possible to catch potential slip-ups before they become costly penalties.
Foster Employee Engagement and Education
Even the most cost-effective plan won’t perform if employees don’t participate. Engage your workforce by:
- Scheduling webinars or on-site meetings to walk through plan features
- Providing quick reference guides or video tutorials for online enrollment
- Highlighting success stories and model outcomes to illustrate the power of saving
- Offering periodic “office hours” where staff can drop in with questions
Frequent, targeted communication not only boosts participation rates but also reinforces trust in the plan’s value.
Periodically Review the Investment Lineup
Market conditions and manager performance can change rapidly. Schedule a quarterly or semi-annual investment committee meeting to:
- Assess each fund’s performance against its benchmark
- Evaluate expense ratios and potential fee erosion
- Consider participant demographics and retirement horizons
- Replace or add funds to address coverage gaps or emerging strategies
Keep detailed minutes of these sessions to demonstrate fiduciary prudence and a disciplined review process.
Document All Fiduciary Decisions
Your paper trail is your best defense in the event of an audit or participant dispute. For every major decision—vendor selection, plan amendment, investment change—compile:
- Meeting agendas and attendee lists
- Performance reports, fee analyses, and benchmarking data
- Formal resolutions or board approvals
- Follow-up action items with assigned owners and deadlines
Maintaining well-organized records not only satisfies ERISA’s documentation requirements but also fosters transparency and accountability across all sponsoring employers.
By following these best practices, you’ll keep your group 401(k) on a steady path—one that delivers cost savings, regulatory compliance, and a positive experience for every participant.
How to Choose the Right Service Provider for Your Group 401(k)
Selecting the right administrator and fiduciary partner is critical to harness the benefits of a group 401(k) while managing risk and preserving flexibility. With countless vendors vying for your business, focusing on a handful of core criteria—and asking targeted questions—will help you zero in on the provider that best aligns with your group’s needs.
Key Evaluation Criteria
When evaluating potential service providers, consider:
- Expertise and Track Record
Does the provider have a proven history administering group 401(k) plans—whether MEPs, PEPs, controlled groups, or ARPs? Look for case studies or client references in your industry. - Technology Platform
A modern, user-friendly portal should offer secure payroll integrations, real-time reporting dashboards, and mobile access for participants and plan administrators. - Scale and Pricing Transparency
Larger providers often negotiate better fee schedules, but smaller firms can deliver custom attention. Ensure fees are clearly broken out—recordkeeping, investment management, advisory, and PPP/TPA services—so you can benchmark each line item. - Fiduciary Support and Coverage
Does the vendor serve as a 3(16) administrative fiduciary or 3(38) investment manager? Confirm the scope of their liability insurance and whether they’ll contractually assume ERISA duties. - Client Service and Communication
Assess responsiveness: is there a dedicated account team? What are their SLAs for routine issues versus escalations? Review sample communications—enrollment kits, notices, statements—to gauge quality and clarity.
Comparing Top Providers
Below are some common options in the group 401(k) market. Use this as a starting point for deeper research:
- Summit Consulting Group, LLC
Strengths: Independent fiduciary delegation (3(16) and 3(38)), transparent fee models, ERISA compliance expertise, and collaborative approach that preserves existing custodian or recordkeeper relationships. - Human Interest
Strengths: Intuitive technology, fast setup, integrated payroll partnerships, and automated compliance testing. Best for groups prioritizing a slick digital experience. - Lincoln Financial
Strengths: Robust balance sheet, broad investment lineup, MEP and MEAP options, and deep experience with financial advisors and associations. Ideal for large groups seeking scale. - 401GO Syndicate
Strengths: Association-based group plans with co-branding, same-day employer onboarding, and zero sponsorship costs. Well suited for chambers of commerce or industry coalitions looking to add member value.
Questions to Ask Potential Providers
Before signing an agreement, make sure you have clear answers to:
- How are fees structured and where can we find full transparency on per-participant, asset-based, and flat fees?
- What fiduciary services do you assume, and how is liability allocated in writing?
- Can you outline your implementation timeline and the key milestones for data feeds, adoption agreements, and participant enrollment?
- How do you handle legislative changes—like SECURE Act 2.0 updates—and what is your amendment process?
- What support do you offer for ongoing governance—such as vendor benchmarking, investment lineup reviews, and compliance calendar alerts?
Ensuring Integration with Your Existing Ecosystem
A smooth data flow between systems keeps your group plan running efficiently:
- Payroll and HRIS Connectivity
Verify prebuilt connectors or APIs for your primary payroll or HR platform, and ask about testing protocols to catch errors early. - Recordkeeper and Custodial Arrangements
If you’re retaining an existing recordkeeper or custodian, confirm how the provider will collaborate and share data securely. - Benefit Platforms and Open-Enrollment Tools
Ensure the group 401(k) portal can integrate with your broader benefits hub, so you can promote retirement enrollment alongside health, life, or other perks. - Single Sign-On (SSO) and Security Standards
Strong authentication—SSO, multi-factor authentication, and SOC 2 compliance—minimizes friction for participants and safeguards sensitive data.
By systematically vetting providers against these criteria, comparing real-world solutions, and confirming seamless integrations, you can select a service partner that delivers cost savings, compliance peace of mind, and a superior participant experience for your group 401(k).
Frequently Asked Questions about Group 401(k) Plans
Group 401(k) plans raise unique questions around structure, eligibility, and governance. Below are concise answers to common queries that can help you navigate the details.
What differentiates a Pooled Employer Plan (PEP) from a traditional MEP?
- Pooled Employer Plan (PEP):
• Established and maintained by a Pooled Plan Provider (PPP) under the SECURE Act
• PPP assumes most fiduciary duties (3(16) administration, 3(38) investment management)
• Sponsors sign an adoption agreement but share minimal liability - Multiple Employer Plan (MEP):
• Formed by two or more unrelated employers without a centralized PPP
• Employers share administrative tasks and nondiscrimination testing
• Each sponsor retains joint fiduciary liability for plan breaches by any member
Can a small business with fewer than five employees join a PEP?
Yes. The SECURE Act removed minimum employer size requirements for PEP participation. As long as you:
- Sign the PPP’s adoption agreement
- Meet any service or age eligibility criteria specified in the plan document
- Provide required census data and comply with ongoing contribution deadlines
A PEP can be a cost-effective option even for very small businesses.
What happens if one employer leaves the group plan?
When a sponsor exits a pooled plan:
- They cease making contributions, and their employees are removed from the census
- The PPP updates the pooled Form 5500 and compliance testing to reflect the change
- If the plan is a PEP, the departure does not threaten the plan’s qualified status (no “one-bad-apple” rule)
- In a traditional MEP without a PPP, departing sponsors must ensure timely removal to avoid joint liability and testing complications
How often should we review our PPP’s performance?
Regular reviews are essential to maintain cost efficiency and compliance:
- Conduct a formal vendor and fee benchmarking at least once a year
- Hold semi-annual or quarterly fiduciary meetings to assess:
• Service-level metrics (enrollment rates, issue response times)
• Investment lineup performance and expense ratios
• Compliance calendar adherence - Document each review in scorecards, meeting minutes, or decision logs
Are group plans available to nonprofits and governmental entities?
- Nonprofit organizations (e.g., 501(c)(3) charities) can join ERISA-governed group plans, including PEPs, MEPs, controlled-group plans, or ARPs, provided they meet the plan’s eligibility rules.
- Governmental plans (such as state and local public-sector retirement systems) are exempt from ERISA and generally cannot participate in ERISA-compliant group 401(k) arrangements.
- Church plans have limited options and may require special plan designs or exemptions to join pooled arrangements.
Next Steps for Implementing a Group 401(k) Plan
As you’ve reviewed the key decisions—choosing between MEPs, PEPs, controlled-group or association plans, selecting a service provider, and mapping out your compliance calendar—putting your strategy into motion depends on a structured approach and the right expertise.
- Confirm your plan type: Evaluate which model best fits your legal structure, cost objectives, and appetite for fiduciary delegation.
- Compare and select providers: Use a clear scorecard to assess fee transparency, technology integrations, fiduciary coverage (3(16), 3(38), Named Fiduciary), and service quality.
- Establish a compliance roadmap: Document all critical deadlines for Form 5500 filings, nondiscrimination testing, SPD updates, and plan amendments.
- Build your implementation team: Assign roles to HR, finance, legal, and your chosen Pooled Plan Provider or TPA for data gathering, document execution, and enrollment coordination.
- Execute your launch plan: Roll out tailored communications, host enrollment sessions, and leverage digital tutorials to drive participant engagement from day one.
For impartial guidance backed by independent fiduciary services and proven TPA support, turn to Summit Consulting Group, LLC. Schedule a consultation today to explore how we can help you reduce costs, streamline administration, and protect your organization from fiduciary risk—so you can focus on what you do best.
