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On December 19, 2019, the Senate approved legislation (HR 1865) that included the Setting Every Community Up for Retirement Enhancement Act of 2019 (The SECURE Act). The SECURE Act creates a new provision within ERISA to allow companies to offer retirement benefits to unrelated small businesses through a pooled employer plan (PEP), which is a type of multiple employer plan (MEP) that uses a new entity called a “pooled plan provider.” The new law deems PEPs single employer ERISA plans and creates a new legal structure to govern such plans.

This new law includes almost thirty additional provisions aimed at encouraging the adoption of employer-sponsored plans and lifetime income options, altering plan distribution rules, easing administrative requirements, and improving certain types of defined benefit plans. A number of the provisions are effective with the new year (2020). 

How the SECURE Act impacts PEOs

The SECURE Act makes two changes that impact PEO-sponsored retirement plans:  

  • One Bad Apple Relief: The SECURE Act would eliminate the “one bad apple” rule for MEPs maintained by employers that either (1) have a “common interest other than having adopted the plan,” or (2) use a pooled plan provider.
  • Form 5500 Reporting: All MEPs – including PEO-sponsored retirement plans - would be required to include the following on Form 5500:
  • A list of participating employers;
  • A good faith estimate of the percentage of total contributions made by participating employers during the plan year;
  • The aggregate account balances attributable to each employer in the plan; and
  • Identifying information for the pooled plan provider, if the plan is a pooled employer plan.

While the bill expands the Form 5500 reporting requirements for all MEPs, it limits its application to MEP retirement plans, which means that MEP health plans (PEO-sponsored health insurance plans) would not be subject to these specific reporting requirements.

View a detailed summary of the SECURE Act to understand the provisions of the new law.