Human resources outsourcing firm Paychex has signed up at least 1,000 businesses for its pooled employer plan, the company said Tuesday.
The businesses are among the roughly 700,000 existing clients that use Paychex’s other services, such as payroll and human capital management, according to the firm. Most of the new pooled employer plan, or PEPs, clients have not previously offered a retirement plan to their employees, often because of the administrative burden of setting up a 401(k), said Michael Majors, senior director of national retirement sales at Paychex.
“In [the PEP’s] first few months, we wanted to focus primarily on new clients. Nearly all of our sales so far are to businesses that don’t currently have a 401(k) plan,” Majors said. “It is really often complexity that has kept these businesses on the sidelines … Small-business owners have a lot on their plate just to grow and manage their businesses.”
The company is now in talks with other clients that already have traditional retirement plans about switching to the PEP structure, he said.
Early entrants in the PEPs market have pointed to demand not only from small businesses without plans but also from those with 401(k)s that want to have less of a fiduciary role. Fidelity Investments, for example, is working to sign on new “micro-market”-size clients for its PEP, which is expected to go live in March. In that service, both the plan administration and investments are provided by Fidelity.
The fiduciary overseeing investment selection for Paychex is Mesirow Financial, said Craig Silverstein, a product strategy manager at Paychex. The PEP includes a range of mutual funds from a variety of third-party providers, Silverstein said. Fees for the PEP vary by employer size and whether the clients use other Paychex services.
The clients signing up for the PEP range from those with only a few employees to businesses with more than 100 workers, Majors said. “It’s kind of all over the map, which we’re excited about.”
The first PEPs on the market went live as early as Jan. 1, though most providers are in the early stages of bringing on clients. As of Tuesday, nearly 50 different entities had filed initial registrations with the Department of Labor to be pooled plan providers.
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