SEC Division of Investment Management Issues Statement Clarifying Treatment of Pooled Employer Plans Under Certain Federal Securities Laws
On May 4, 2026, the Division of Investment Management (“Staff”) of the US Securities and Exchange Commission (“SEC”) issued a statement (“Statement”) addressing two important questions regarding the treatment of pooled employer plans (“PEPs”) under certain federal securities laws.1 The Statement provides welcome relief for PEP sponsors, pooled plan providers, and collective investment trust (“CIT”) sponsors by confirming that: (1) PEPs may rely on the “single trust exclusion” in Section 3(c)(11) of the Investment Company Act of 1940 (“’40 Act”) to avoid regulation as an investment company; and (2) CITs may rely on Rule 180 under the Securities Act of 1933 (“’33 Act”) when issuing interests to PEPs that cover self-employed individuals.
Background
Pooled Employer Plans Under the SECURE Act
The SECURE Act of 2019 created PEPs to permit multiple, unrelated employers to join a single qualified retirement plan, subject to the applicable requirements of ERISA and the Internal Revenue Code (“Code”). Different types of employers may participate, including those with “self-employed individuals” as defined in Section 401(c)(1) of the Code.
The PEP provisions of the SECURE Act have greatly enhanced the ability of employers (particularly small and medium-sized employers) to maintain retirement programs for their employees. By way of background, in a single employer plan, participation is limited to the employer/sponsor and members of its controlled group. Historically, the DOL took the view that a multiple employer plan (“MEP”) would be recognized as a single plan (often referred to as a “closed MEP”) for purposes of satisfying many of ERISA’s requirements, such as the annual Form 5500 filing if the participating employers shared certain commonalities—for example, being members of a bona fide group or association, as defined by DOL, and having a common nexus such as industry, line of business, or geography (subject to certain additional conditions). In contrast, if a plan included participating employers without a relationship other than participating in the MEP (an “open MEP”), the DOL considered each participating employer to maintain its own plan that was required to independently satisfy ERISA’s requirements, including filing a separate Form 5500 and obtaining an independent audit, if applicable. This position significantly reduced the availability of the streamlined administration and economies of scale associated with MEPs that were treated as a single plan, and meant that many small and medium-sized employers were left to struggle with the cost, complexity, and legal exposure associated with maintaining their own single employer plan or forgo having a plan at all.
The SECURE Act essentially reversed this DOL position by creating the PEP (a type of open MEP), which is treated as a single plan for purposes of ERISA. A PEP is generally a defined contribution plan established to provide benefits to the employees of two or more unrelated employers that do not have a common interest other than adoption of the plan. Each PEP must be overseen by a Pooled Plan Provider (“PPP”), which serves as the named fiduciary and plan administrator (among other requirements). The PPP will typically be responsible for most administrative duties related to the PEP, freeing participating employers from the burden of those responsibilities and enabling them to limit their legal exposure for such matters. In addition, PEPs are expected to offer the possibility of lower costs than single employer plans on account of the pooling of assets and attendant economies of scale, as well as certain streamlined reporting and disclosure requirements.
The Two Federal Securities Law Questions
Despite the apparent congressional intent to facilitate PEPs, two unaddressed questions have posed practical barriers to more widespread PEP adoption and operation.
First, because PEPs cover multiple, unrelated employers, it was unclear whether a PEP could rely on the “single trust exclusion” under Section 3(c)(11) of the ’40 Act, which had traditionally been available only to single employer plans.
Second, Rule 180 under the ’33 Act exempts from registration any interest or participation in a CIT issued to an employee benefit plan that covers self-employed individuals, provided that the plan and issuer meet the criteria set forth in the rule. It was not clear that Rule 180 would be available to a PEP due to the requirement in Rule 180(a)(2) that limits the exemption to single employer plans. It was also unclear how CITs could satisfy the requirement in Rule 180(a)(3) that the issuer of the securities have reasonable grounds to believe that the “employer” meets the rule’s “sophistication requirement.” As a result, PEPs covering self-employed individuals generally could not access CIT investments, and some PEPs excluded employers with self-employed individuals to preserve CIT eligibility.
The Staff’s Statement
’40 Act: Single Trust Exclusion
To avoid regulation as an investment company under the ‘40 Act, employee benefit plans often rely on the exclusion from the definition of “investment company” under Section 3(c)(11), which excludes, among other things, “[a]ny employee’s...profit-sharing trust which meets the requirements for qualification under section 401 of [the Code]…” commonly referred to as the “single trust exclusion.”
The Staff historically has interpreted this single trust exclusion as referring to:
- A trust fund for employees of a single employer;
- A trust fund for employees of employers so closely related as to be regarded as a single employer (e.g., a parent company and its subsidiaries); and
- A trust fund established and controlled by employers and/or a union representing the employees of such employers.
A PEP does not fall into any of these categories because it is typically structured as a trust fund for employees of multiple, unrelated employers. The Staff explained in the Statement that it would not object to a PEP treating itself as a single employer plan for purposes of the ’40 Act and relying on the Section 3(c)(11) single trust exclusion if the PEP: (i) is subject to ERISA, and (ii) meets all of the requirements of the applicable Code section referenced in Section 3(c)(11) (in other words, the qualified plan rules under section 401 of the Code).
’33 Act: Rule 180 and CIT Interests
The Staff also explained that it would not object if a CIT issues interests to a PEP covering self-employed persons without registering under Section 5 of the ‘33 Act in reliance on Rule 180 if (i) the plan is subject to ERISA, and (ii) the issuance meets all requirements in Rule 180(a)(1) and (a)(3).2 Because the SECURE Act was designed to expand PEP access for small employers and self-employed individuals, the Staff emphasized its view that it is reasonable to treat PEPs as single employer plans for purposes of Rule 180(a)(2). Further, with respect to the Rule 180(a)(3) sophistication requirement, the staff clarified that a CIT may apply such requirement with respect to the plan’s pooled plan provider, rather than any employer.
Scope and Limitations
The Staff noted that CIT interests eligible to rely on Rule 180 remain subject to the ’33 Act’s anti-fraud provisions. These provisions also apply to any other investment issued to a PEP that would otherwise qualify for the Rule 180 exemption, including interests in single trust funds or securities arising out of insurance contracts. The SEC’s Division of Corporation Finance has separately addressed PEP eligibility for the Section 3(a)(2) exemption.3
Significant Implications
The Statement has several significant implications:
- For PPPs and PEP Sponsors: The Statement removes uncertainty regarding PEP treatment under the ’33 Act and ’40 Act, providing confidence that a PEP may treat itself as a single employer plan for purposes of Section 3(c)(11) of the ’40 Act.
- For CIT Sponsors and Bank Trustees: CIT sponsors may now issue interests to PEPs covering self-employed individuals without ’33 Act registration, so long as the other requirements of Rule 180 are met.
- For Employers with Self-Employed Individuals: Employers with self-employed individuals (such as partnerships and sole proprietorships with common-law employees) may now participate in PEPs without causing the plan to lose CIT access, expanding available investment options and potentially reducing costs.
- For Investment Menu Design: PEP Plan fiduciaries may now consider a broader array of CITs, often lower-cost alternatives to mutual funds, for PEP investment lineups, benefiting participants through reduced expenses.
Key Takeaways
The Statement reflects the Staff’s long-awaited recognition that Section 3(c)(11) of the ‘40 Act and Rule 180 under the ’33 Act should be interpreted consistently with the SECURE Act’s purpose of removing barriers to the adoption of multiple employer plans and expanding retirement savings access. While the Statement represents Staff-level guidance rather than formal SEC rulemaking, it provides meaningful comfort for market participants and should facilitate continued PEP growth.
Plan sponsors, PPPs, CIT trustees, and their counsel should review current practices and consider whether adjustments to investment lineups or employer eligibility criteria are appropriate. In particular, PEPs that previously excluded employers with self-employed individuals to preserve CIT access should reassess whether those restrictions remain necessary.
This Legal Update is for informational purposes only and does not constitute legal advice. Please contact a member of our ERISA and Employee Benefits Practice Group or Investment Management Practice Group for advice specific to your situation.
1 The Statement represents the views of the Staff, and is not a “rule, regulation, or statement of the Commission,” and “like all staff statements, has no legal force or effect.”
2 Rule 180(a)(1) generally requires that the plan covers self-employed individuals and is either a pension or profit-sharing plan that qualifies under section 401 of the Code or an annuity plan that meets the requirements for deduction of the employer’s contribution under section 404(a)(2) of the Code. Rule 180(a)(3) generally requires that the issuer shall have reasonable grounds to believe and, after making reasonable inquiry, shall believe, immediately prior to any issuance that the employer is able to adequately represent its interests and those of its employees because either: the employer is a law firm, accounting firm, investment banking firm, pension consulting firm or investment advisory firm engaged in providing services that involve knowledge and experience in financial and business matters; or the employer prior to adopting the plan obtains advice from certain unaffiliated persons or entities that have knowledge and expertise in financial and business matters.
