SECURE Act

A key implication for financial services firms under the SECURE Act

The passage of the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) includes provisions on pooled individual account plans whose participating employers lack a common nexus (PEPs). PEPs should be particularly appealing to small employers who were previously daunted by the cost and complexity of sponsoring, and the fiduciary duty risk from managing, their own retirement plan. A pooled plan provider (PPP) would serve as plan administrator and “named fiduciary” under ERISA of the PEP. In this capacity, a financial services firm operating as a PPP would have various fiduciary responsibilities, including all administrative functions and the selection of investment options in the plan lineup. A PPP must also ensure that all persons/firms handling plan assets are properly bonded under ERISA. The DOL will issue regulations over the coming months on the exact contours of a PPP’s duties. Financial services firms looking to gain market share of the plan market may wish to watch these developments closely, particularly as we gauge interest in these types of plans by small employers.