Aon Pooled Employer Plan Reaches $1 Billion in U.S. Plan Assets and Commitments

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Oct 12, 2022, 09:00 ET

Firm cuts participant fees in half, leading to higher employee retirement savings and lower costs for employers
Leaders urge Congress to pass legislation to allow 403(b)programs into PEPs

CHICAGO, Oct. 12, 2022 /PRNewswire/ -- Aon plc (NYSE: AON) has announced its pooled employer plan (PEP) has reached $1 billion in U.S. 401(k) assets and commitments since its inception on Jan. 1, 2021. Today, the Aon PEP is the industry leader with more than 40 employers providing 401(k) benefits to over 30,000 employees, helping them shape better retirement decisions. Aon, a leading global professional services firm, reports participating employers are from a diverse mix of industries including biotech and life sciences, manufacturing, services, consumer products, energy, and technology and transportation.

Participants are benefiting from a higher performing, more efficient 401(k) program, with employees able to accumulate up to 11 percent more retirement savings during their career due to lower fees compared to typical 401(k) benefit programs.* Within the Aon PEP, "all-in" participant fees can be less than half of those paid in traditional 401(k)s according to data from Brightscope and current Aon PEP costs.

"The benefits of transitioning to a pooled employer plan – half the costs, reduced time commitment from corporate staff, improved governance and high-quality retirement planning options – have become material for employers and their employees," said Rick Jones, senior partner in Aon's Wealth Solutions. "We expect more than half of U.S. employers to merge their traditional 401(k)s into pooled employer plans by 2030."

The combined scale in PEPs help lower plan costs, including record-keeping and investment management fees. Beneficiaries also have easier access to investment tools and education services to better prepare for retirement.

From the employer perspective, pooled employer plans reduce staff time and resources dedicated to plan management, compliance and governance (i.e., elimination of many tasks such as government filings, plan audits, etc.). PEPs also reduce fiduciary and litigation risks.

Jasmine Simkins, CPP, SHRM-CP, director of human resource operations for West Marine, a marine retailer that joined the Aon PEP in 2021, said her company has saved about 65 percent of its 401(k) program costs, which in turn goes right back into what they can offer employees. "Our crew members are saving, we're saving, and it makes it easier to offer bigger and better things that will help us with retention and getting the right talent in place," Simkins said. "Not only does it help us as a company, but it's helping crew members understand their investments and they're having a better experience with the program."

"The Aon PEP offers a significant opportunity to enhance retirement security for American workers and build a more resilient workforce across the country," said Byron Beebe, senior partner in Aon's Wealth Solutions. "It provides efficiency and scale while maintaining individual employer autonomy to define matching and other contribution levels, vesting rules and other key plan design features."

Aon hopes to offer the same retirement benefits to U.S. non-profit workers soon to provide this underserved market with the potential for stronger retirement outcomes. The firm urges Congress to enact bipartisan legislation referred to as Securing a Strong Retirement Act of 2022, which, among other things, would allow 403(b) plans to join pooled employer plans.

"Employees and employers in the non-profit sector should also benefit from pooled employer plans," Jones said. "We strongly encourage Congress to enact legislation that allows 403(b) plan beneficiaries to take advantage of this innovation to bolster retirement savings."

To read more information about the Aon PEP, click here.

*The performance modeling shows a hypothetical employee participating in the Aon PEP would save $1,347,000 throughout their career compared to $1,210,000 for a worker in a traditional 401(k) with higher fees. It assumes a 25-year-old employee with $50,000 starting salary, $3,000 starting account balance, 4 percent annual pay increases, age 67 retirement, 3 percent initial savings rate with auto-escalation to 10 percent, invested in a diversified S&P through target date fund, and employer matching 100 percent on first 3 percent and 50 percent on next 2 percent. Income improvement in the Aon PEP assumes a 25 basis points reduction in participant fees and the same modeling parameters.

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