For small businesses that are connected in almost any way,
a 401GO Syndicate is a superior alternative to a MEP or PEP.
Much like a multiple-employer plan (MEP) and pooled employer plan (PEP), a 401(k) Syndicate from 401GO offers a streamlined and efficient way to group multiple small businesses together to take advantage of economies of scale. A Syndicate comes with some substantial advantages over a multiple-employer plan (MEP) or pooled employer plan (PEP).
| MEP/PEP | Syndicate |
|---|---|
|
The sponsoring organization is required to assume fiduciary liability |
Each employer has its own plan and its own associated fiduciary |
|
A group audit is performed when the entire plan eligible participant count is 120+ |
Each plan has its own audit, only if the individual plan eligible participant count is 120+ |
|
Setup takes months to complete and costs thousands |
Setup takes only one day, and the setup fee is zero |
|
Each business must adopt specific plan designs and provisions. |
Each business has the flexibility to select their preferred plan design and provisions |
|
It’s difficult for an employer to disconnect from the group |
Each plan is portable, and it’s easy for employers to terminate the relationship |
|
One financial advisor serves the entire plan, regardless of individual needs |
Each employer can bring their own financial advisor, or use one connected to the group |
|
Businesses must be connected in some way, often belonging to the same professional organization |
Any employer can participate, even if they have no professional connection to the other businesses in the group |
Perhaps the biggest benefit of the 401GO Syndicate is the cost. Employers have access to much better pricing through the Syndicate than they could get if they worked with us directly. Utilizing economies of scale, pricing could be as low as
$4 per participant
Are MEP's actually cheaper?
The concept behind MEPs is that the more assets are contained within the plan, the more the plan can afford to pay for excellent administration services and investment options. Many providers dangle their excellent relationships with custodians or their proprietary investment selection like a carrot in front of employers to draw them into their plans.
The reality tells a different story. Current industry improvements have made good administration and high-quality investments more available and affordable than they have been in the past.
- Most MEPs are not big enough to take advantage of the heavily discounted pricing they advertise. It can take years for the plan to grow large enough for the discounts to be valuable.
- Because the value of an MEP is only realized over a great deal of time, employers often find themselves fighting an uphill battle for years to get the discounts they were expecting.
- Proprietary or exclusive investments aren’t typically better than those that are readily available. Excellent, affordable and well-performing funds are accessible to even very small single-employer plans.
- Flat fees are becoming more popular, because they are usually more appropriate. The difficulty of managing an MEP does not scale with the size of assets, only with the headcount. So, flat fees, or fees based on number of participants, keep costs low. MEPs usually charge AUM fees rather than headcount fees.
The 401GO Syndicate charges primarily by headcount. And, if that headcount is 50+ across 5 businesses, the per participant price decreases.
Our investment lineup is a robust and diverse selection of funds that are both affordable and good quality.
Do MEPs lower employer liability?
Employers always have some fiduciary responsibility for their 401(k) plan. If they outsource some of this responsibility to a provider, they must still monitor that provider to ensure they are doing a good job and not overcharging.
For this reason, employers should avoid working with any professional whose fees they don’t fully understand.
- MEP providers are difficult to monitor, because employers are farther removed from them. Fees and services are less transparent, and employers have less control over which providers are used.
- Employers can easily become complacent when they believe the MEP sponsor is managing everything, but if problems arise, it can create confusion about who is the responsible party. If employers aren’t monitoring closely, they can be caught off guard.
When you participate in a 401GO Syndicate, you’ll have full transparency to see the work being done and the fees you’re paying, the same as if you had an individual plan.
Avoid these annoying problems.
While fees and liability are big issues for employers, some smaller problems can be like a pebble in your shoe, causing pain over time. When making your decisions, be sure to consider these issues:
- MEPs and PEPs can be expensive to exit. By contrast, with a Syndicate plan there is no termination fee, and each employer has its own fiduciary, its own portal, and files its own reports, making each plan portable and easy to remove.
- MEPs come with requirements that employers must include in their plans, even if they don’t suit their needs well. A Syndicate plan allows companies to customize their 401(k) plan design without those limitations.
- Because MEPs are built to include a large group, they almost always require an audit, which is an additional expense for employers. A Syndicate does not require an outside audit, and individual plans would only need to be audited if they have 120+ eligible participants.
If your organization might benefit from a 401GO Syndicate, contact us for a price quote.
401GO
Product
Discover
Help Center
