Why the PEP conversation has fundamentally changed 

That change reflects more than growing awareness. PEPs are moving into the mainstream of defined contribution governance, with sponsors increasingly evaluating them alongside more established outsourcing models rather than viewing them as a niche innovation.

Recent research from Cerulli Associates illustrates just how quickly perceptions are changing. Nearly 60% of plan sponsors now describe themselves as either very or extremely familiar with PEPs.¹

In just one year, the proportion of sponsors saying they are "very interested" in joining a PEP rose from 7% to 40%, while those saying they were not interested fell from 67% to 20%.¹ These figures suggest that the market has moved beyond education and into active evaluation.

Several factors are driving this change.

For many organizations, cost pressures remain an important consideration. However, conversations today are increasingly focused on governance as much as economics. Sponsors are looking for ways to reduce fiduciary risk, streamline administration and allow internal teams to concentrate on activities that directly support the business.

Corporate restructuring has become another important catalyst. As organizations divest businesses, complete acquisitions or create standalone entities, retirement plans often need to be established quickly, sometimes without the benefit of dedicated HR or finance resources. In these situations, a PEP can provide an established governance and administrative framework that enables new organizations to focus on building their businesses rather than recreating retirement plan infrastructure from scratch.

The motivations also vary by organization. Larger plans are often most interested in delegating fiduciary responsibility, while smaller and mid-sized employers, operating with lean HR teams, frequently place equal emphasis on the administrative support that accompanies a more outsourced model. We frequently see multinational organizations looking to use PEPs due to their experience with similar collectively managed retirement plan arrangements in their other countries of operation. For these employers, PEPs offer a way to streamline and harmonize their governance and vendor relationships across regions.

The potential financial benefits can also be meaningful. In our experience, organizations moving into this model have generally experienced some fee savings once investment management, recordkeeping and fiduciary costs are considered together.²

While every organization will differ, the possibly opportunity to improve both governance and efficiency is becoming an increasingly compelling combination.

One of the more interesting developments in the market is how PEP implementation itself is evolving.

Early perceptions often characterized PEPs as relatively standardized arrangements, requiring sponsors to adopt a single investment menu and common plan structure. As the market has matured, that is no longer the case.

Increasingly, providers are approaching larger PEP implementations in much the same way they would an outsourced chief investment officer (OCIO) mandate.

For incoming employers, for example, we now undertake demographic analysis to understand participant characteristics and build an investment approach that reflects the specific needs of each workforce. This may include selecting an appropriate target date strategy and tailoring aspects of the investment structure, while still delivering the governance benefits associated with a pooled arrangement.

This reflects a broader trend across retirement plans: outsourcing is becoming less about standardization and more about combining delegated governance with thoughtful customization.

Despite growing interest, PEPs are not the optimal solution for every sponsor.

Organizations with sophisticated in-house investment teams may prefer to retain responsibility for investment decisions while continuing to receive advice through more traditional fiduciary arrangements.

Similarly, very large plans – such as those with assets exceeding around $5 billion — may already benefit from economies of scale that reduce the potential cost advantages of joining a PEP.

There can also be practical considerations. Sponsors that have invested heavily in customized recordkeeper integrations or highly specialized administration may determine that the disruption associated with changing platforms outweighs the potential benefits.

Ultimately, the decision should not be viewed as a choice between a "good" or "bad" governance model. Rather, it is about selecting the model that best aligns with an organization's objectives, resources and long-term strategy.

Five years after their introduction, PEPs appear to be entering a new phase of market adoption.

The conversation is no longer centered on explaining the concept. Instead, plan sponsors are increasingly evaluating whether expanded outsourcing can help them address governance, cost and operational challenges while allowing internal teams to focus on strategic priorities.

As the market continues to evolve — and as PEP implementations increasingly resemble the tailored approach traditionally associated with OCIO mandates — the question is likely to become not whether sponsors have heard of PEPs, but whether they have fully considered where they fit within their own retirement plan strategy.

_{¹ Cerulli Associates 2025 Retirement Markets Report. Responses are taken from a proprietary Cerulli survey of 966 401(k) plan sponsors.}

_{² Savings are estimated and cannot be guaranteed. Not inclusive of audit savings. Mercer estimate of total savings includes recordkeeping, investment management, and fiduciary fees and assume full passive target date fund re-enrollment.}