PEPs were sold to the retirement plan industry as the answer to everything—lower costs, better governance, and less fiduciary risk for employers. What doesn’t get enough attention is the new layer of conflicts that PEPs can introduce, especially when the same small circle of providers controls too much of the operation.
In many PEP arrangements, the Pooled Plan Provider, the TPA, the recordkeeper, and sometimes even the investment manager are economically tied together. That doesn’t automatically violate ERISA, but it should immediately raise fiduciary eyebrows. When oversight and execution live under the same roof, independence becomes a fiction.
Conflicts show up in subtle ways. Provider selection becomes “preferred” rather than prudent. Fees get justified as bundled efficiencies rather than benchmarked against the market. Advisors are told the arrangement is turnkey, while critical decisions are made without meaningful input. And when something goes wrong, accountability becomes a game of finger-pointing.
The danger for plan sponsors and advisors is assuming that PEP status magically eliminates fiduciary responsibility. It doesn’t. ERISA still requires a prudent process, and conflicts of interest are exactly the kind of issue plaintiff attorneys love to exploit. A PEP with conflicted providers isn’t safer—it’s riskier, because problems can scale quickly across dozens or hundreds of adopting employers.
For advisors, conflicts can be existential. If the PPP controls advisor assignment and also benefits from internal provider relationships, loyalty may run to the platform, not the advisor who brought the business.
PEPs can work. But only when conflicts are disclosed, managed, and monitored—not ignored. In the rush to scale, providers should remember that efficiency never excuses self-interest, and trust is the one asset a PEP can’t afford to lose.
