The defined contribution retirement plans known as Pooled Employer Plans (PEPs) came onto most people's radar with the signing of the SECURE Act in late 2019. We should see them debut January 1, 2021. Despite their relative newness, they descend from a type of plan that's been around a while — the multiple employer plan (MEP). That doesn't mean there aren't questions about PEPs. In fact, no one really knows the answers to these important ones: Will PEPs be successful? What will be the ideal number of employers in them? the right number of participants? Will they be better than the options small employers have now?

To get a sense of what's in store with PEPs and what could change, it makes sense to dig into the ancestral MEPs and analyze them. That's exactly what a paper by Morningstar senior analyst Lia Mitchell and head of policy research Aron Szapiro, author and contributor respectively, does. In the process, Mitchell and Szapiro have come up with some interesting recommendations about PEPs.

This is not your father's MEP

PEPs differ from MEPs in several ways. Besides the axing of the  notorious "one bad apple rule" where one employer's problems would ruin a MEP for all employers in the plan, PEPs contain  the new "pooled plan provider" requirement. This is a fiduciary that runs the plan but isn't one of the employers in the plan. The PEP also adds the position of a trustee who collects the plan contributions from the employers.