SEC Issues Staff Statement Regarding Pooled Employer Plans

The Securities and Exchange Commission (SEC) has issued a staff interpretation that addresses the use of collective investment trusts (CITs) in pooled employer plans (PEPs). 

The guidance advances the goals of the SECURE Act by reducing barriers that have limited PEP growth and access to CITs—while continuing to rely on existing securities law exemptions. It confirms that PEPs can invest in CITs even when some of the employers participating in the PEP include self‑employed individuals. The statement specifies the following issues.

• PEPs may rely on the single trust exclusion in Section 3(c)(11) of the Investment Company Act to avoid registering as an investment company.
• CITs may rely on Rule 180 to avoid registration when accepting investment from PEPs even if there are self-employed participants in the PEP.  

SEC staff will not object to a PEP with self-employed individuals investing in a CIT if the plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA), meets the requirements of 401(a) of the Code and the “sophistication” rule is satisfied. The interpretation specifies that the sophistication rule may be met by the pooled plan provider, rather than requiring every participating employer to satisfy it.   

The guidance does not address the treatment of Multiple Employer Plans (MEPs) that are not PEPs, PEPs that are not subject to ERISA or PEPs that are not qualified under Code section 401(a). 

Staff interpretations are meant to clarify how the staff applies existing rules to specific scenarios for the benefit of those who must apply securities laws. However, they only represent views of the SEC staff and are not legally binding.