SEC Staff Maps Out Pooled Employer Plans’ Route to Exemptions

Employee benefit plans issue interests in their plans to plan participants. Such plans, and their related trusts, generally rely on the so-called single trust exemption in Section 3(a)(2) of the Securities Act of 1933 to avoid having to register the offering of their interests with the SEC.

Similarly, because employee benefit plans are pools of assets, many such plans, and their related trusts, also rely on the single trust exclusion in Section 3(c)(11) of the Investment Company Act of 1940 to avoid regulation as investment companies.

Historically, smaller employers often have encountered roadblocks to offering employee benefit plans. Specifically, such employers may not have the human resources to administer a plan or the financial resources to pay required third-party administrators, accountants, attorneys, and other professionals. To encourage smaller employers to provide retirement plans for their employees, Congress in 2019 enacted the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. One of the SECURE Act’s goals was to permit the establishment of pooled employer plans (PEPs), which make it possible for multiple, unrelated employers to join a single retirement plan and offer retirement benefits to their employees through the plan.

Sections 3(a)(2) and 3(c)(11) Clarified

The SECURE Act made certain necessary changes to the tax code and the Employee Retirement Income Security Act (ERISA) to accommodate PEPs. However, no changes were made to the federal securities laws. As a result, there has been simmering uncertainty as to whether PEPs may rely on the Section 3(a)(2) and 3(c)(11) exemptions to avoid registration under the 1933 and 1940 Acts because they are not true “single trust funds.”

This uncertainty, in part, resulted from the SEC’s historical position that only trusts established and maintained by one employer (or closely related employers and/or an employee union) are single trust funds for this purpose. However, following the SECURE Act, the staff of the SEC’s Division of Corporation Finance and the Division of Investment Management resurveyed the regulatory landscape around PEPs. And, in May 2026, they published guidance to the effect that, because the SECURE Act was intended to promote the use of PEPs, they would not object if PEPs are treated as “single trusts” and rely on the exemptions. This staff guidance has provided plans with much-needed certainty about the regulatory terrain.

Rule 180 Clarified

The staff’s guidance also addressed a related legal uncertainty. Some PEPs include employers with one or more employees who are “self-employed individuals.” For reasons summarized further below, this could result in such plans being unable to invest in collective investment trusts (CITs). CITs generally have lower fees than mutual funds and have therefore become popular funding options for employee benefit plans. Such lower fees are possible because CITs can generally rely on the Section 3(a)(2) and 3(c)(11) exemptions so that, unlike mutual funds, they do not have to contend with the myriad requirements under the 1933 and 1940 Acts.

A potential dead end has arisen, however, because the single trust exemption provided in Section 3(a)(2) of the 1933 Act is, by its terms, unavailable in connection with plans that include self-employed individuals. Accordingly, many such plans (and their related trusts) instead rely on Rule 180 under the 1933 Act. (Rule 180 is an exemptive rule created specifically for Keogh or HR-10 plans, which are plans for self-employed individuals.) But one of the conditions for relying on Rule 180 is that the plan be for employees of a single employer or employees of interrelated partnerships. Accordingly, if a CIT accepted assets from a plan that included self-employed persons, significant questions could arise as to whether the CIT (and plans investing in that CIT) could rely on the Section 3(a)(2) exemption.

Fortunately, the SEC staff’s guidance provides a way around this potential roadblock to investments in CITs by plans that have self-employed participants. Specifically, the staff clarified that it would not object if PEPs are considered as singleemployer plans for purposes of Rule 180.

The Road Ahead

What impact will the staff’s guidance have from a business standpoint? The staff’s guidance may provide a significant boost to PEPs generally, as the universe of such plans continues to grow, and to CITs in particular as they compete with mutual funds for the increasing amount of assets thus requiring investment management.