The Directed Trustee for Pooled Employer Plans

Pooled Employer Plans, or PEPs, are a growing choice for employers since the SECURE Act of 2019 made them possible. A PEP lets many unrelated employers share a single, quality 401(k) without the cost and complexity of sponsoring their own. Smaller employers are joining PEPs to offer retirement benefits that attract and retain talent. In its 2026 Pooled Employer Plan Bulletin, the Department of Labor counted 244 active PEPs holding $11.8 billion in assets, with 1.2 million participants and more than 39,000 participating employers. Nearly 97 percent of those employers have fewer than 100 employees.

From our perspective, PEPs are the 401(k) version of something private wealth has been doing for decades, which is splitting one broad fiduciary job into several narrow ones. In private wealth, the old model was a single trustee who held, invested, and administered everything. Today those duties are commonly separated. A PEP works the same way, with several parties, each with a defined role, and several of them fiduciaries.

The parties you might see:

• Pooled Plan Provider (PPP). The firm that sponsors and operates the plan as a fiduciary. It is the PEP’s named fiduciary, registered with the Department of Labor, and responsible for the plan as a whole. It is also the brand behind the “join our plan” message employers usually meet first.
• Investment Manager or Advisor. The fiduciary responsible for the plan’s investments, including the default fund participants are placed in if they make no election (the QDIA).
• Directed Trustee. The legal owner and holder of the plan’s assets. It keeps the money in trust, separate from every employer’s operating cash, executes the trades the plan directs, processes distributions, files the tax reporting, and reconciles the books. It has no investment discretion. It is a fiduciary, but deliberately a narrow one.
• Recordkeeper. The system of record. It tracks every participant’s account, posts contributions and earnings, and sends the directed trustee the instructions to execute. It handles the data rather than the assets, and generally is not a fiduciary.
• Custodian. Safeguards the assets. It holds the securities and cash, settles transactions, and keeps the ownership records. Custody is ministerial work and generally not fiduciary. In many PEPs, the directed trustee and the custodian are the same institution, which removes a handoff from the chain.
• Plan Administrator (3(16)). The fiduciary who runs day-to-day administration, files the Form 5500, and handles compliance.

Many employers and employees will recognize the PPP’s brand but not the names behind the scenes. Understanding who each party is, and which ones are fiduciaries, is how an employer makes an informed choice about the PEP it joins.

What a PEP Directed Trustee Really Does

Every 401(k) and every PEP is, at its core, a trust. In private wealth, the traditional trustee held the assets, invested them, and protected the beneficiaries’ interests. In a PEP, that role has been distilled into the directed trustee. The same duty of care over the plan’s money, minus the investment discretion, which now belongs to the plan’s investment fiduciaries.

From our vantage point as a retirement custody and directed trusteeship provider, the directed trustee adds real value to a PEP in several places.

• A real API, not a file drop. Recordkeepers connect to AET’s Trust API for trade instructions, positions, and reconciliation. There are no overnight batch files or FTP file drops.
• Paperless employer onboarding. Adopting employers join digitally, without wet signatures or mailed packets. The trustee is never the cap on the PPP’s growth rate.
• Force-outs that don’t strand money. Small balances move into an AET Safe Harbor IRA without a signature. All accounts ship with a 401(k) finder, so participants consolidate their old retirement money instead of adding to it.
• Books at the level the plan needs. We reconcile at the employer level by default, and down to the participant level when a plan wants it there.
• Room for what the investment fiduciaries prudently select. The custody platform already handles private and alternative assets. Holding those in a participant-directed ERISA plan is a serious fiduciary exercise involving valuation, liquidity, and process, and any allocation is a call for the plan’s investment fiduciaries to make. Our role is to make sure the trustee is not the reason a well-considered decision cannot be implemented.

What a Pooled Plan Provider Should Ask a Directed Trustee

The DOL’s own data shows how thin trustee coverage is in this market. In the most recent bulletin, only 26 percent of large PEPs reported a trustee among their Schedule C service providers, and just 36 percent of PPPs reported offering custodial or trustee services themselves or through an affiliate. Some questions worth asking.

Can you onboard a new adopting employer without paper? Employers join PEPs continuously, and onboarding can become a burden. If trustee onboarding is the bottleneck, the PPP’s growth is capped by its slowest vendor. AET onboards adopting employers digitally, and the process can be fully handled through our API.

How granular are your books? Schedule MEP now requires aggregate account balances per participating employer, and a trustee that reconciles only at the plan level makes that filing painful. AET keeps books down to the level that makes sense for the plan.

What happens when a participant leaves? Force-out rollovers are where most trustees hand off to a second vendor. AET is the Safe Harbor IRA provider, so a departing participant’s small balance moves into a compliant IRA inside the same institution that already holds the assets.

Can the trust hold anything beyond the core menu? AET’s custody platform supports private and alternative assets. In a participant-directed ERISA plan, that capability calls for real discipline around valuation, liquidity, and fiduciary process, and any decision to use it rests with the plan’s investment fiduciaries. Our commitment is that the trustee will not be the ceiling on what those fiduciaries can prudently implement.

One Institution, Three Roles

American Estate & Trust is the Nevada-chartered trust company that acts as directed trustee, custodian, and Safe Harbor IRA provider for the plans we serve. We hold the assets in trust, execute and reconcile every trade, process distributions and automatic rollovers, file the tax reporting, and keep separate books at the employer level.

If you are a pooled plan provider, recordkeeper, or advisor building a PEP and the trustee seat is still open, talk to us.

This article is informational. It is not legal, tax, or ERISA advice, and it does not substitute for guidance from qualified counsel familiar with your specific plan and facts.