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A Pooled Employer Plan (PEP): The Retirement Plan Cannabis Companies Need and Can Actually Offer

401(k) Plans PEPs Regulatory Updates Partnerships

Key Takeaways

  • Cannabis companies have long been excluded from traditional financial resources, due to the conflicting federal and state regulations surrounding cannabis.
  • A PEP plan allows cannabis companies to offer a workplace retirement plan.
  • Even with the passage of the SAFER Banking Act, cannabis companies can still offer their employees a workplace retirement plan, it just has to be a PEP; a PEP is just a differently structured 401(k) plan.

The Secure and Fair Enforcement Regulation Banking (SAFER) Act has been approved by the Senate Banking, Housing, and Urban Affairs Committee, and is now clear to move through full consideration by the Senate. The Act will hopefully serve as an olive branch to the previously established and legally operating cannabis business community.

For those that weren't aware, since Colorado first legalized medical and recreational cannabis along with another 47 states, four U.S. territories, and the District of Columbia have legalized some form of medical or recreational cannabis. "Due to the conflict between federal and state laws, many financial institutions do not provide services to state-sanctioned marijuana businesses due to the federal classification of marijuana as a Schedule I controlled substance." Consequently, these businesses and their employees are blocked from accessing deposit accounts, securing lines of credit, and in some cases having access to traditional workplace retirement plans.

With that same logic in mind, why a reputable cannabis business would willingly enter into a state sponsored financial program of any kind, is beyond our level of comprehension.

The SAFER Banking Act hopes to resolve these issues by providing these previously excluded businesses with the necessary financial resources to own and operate a business, like any other legal entity currently has at their disposal.

However, we were already ahead of that curve. We specifically partnered with Paragon Payroll, Inc. and MJstack in order to provide reputable businesses with access to workplace retirement plans; an industry that has for too long been left out in the cold by big banks and financial institutions.

A Pooled Employer Plan (PEP) was designed with small businesses that felt they couldn't afford or manage a workplace retirement plan, as well as effectively run their businesses. A PEP is designed like an omnibus trust, so the participants within the PEP are not subject to the same compliance requirements like Multiple Employer Plans (MEPs) were previously. And because we are not one of the big financial institutions, we are located and operate in our home state of Colorado that has long pioneered the cannabis industry, we see no reason why we should exclude such companies from our offerings. Cannabis companies participating in PEPs also pose no risks to the other participants in the plan, since the SECURE 2.0 Act threw out the "bad apple rule", and participants' identities are shielded through the plan's structuring. Cannabis business owners can rest assured that their assets and their employees' assets are safely held by custodians legally and as normally as any other business.

Get in touch with us, or our partners at Paragon Payroll and MJStack, to discover how a Pooled Employer Plan (PEP) can safely and effectively be the workplace retirement plan solution your cannabis business needs to retain and attract talent. As with every plan client, we offer complimentary proposals, and ongoing financial planning and education resources through our nationally recognized, six-time PLANSPONSOR Top 100 recipient, and sister company, Fi401k Advisors, LLC.

Business is business, we don't discriminate against our plan-clients for the services they legally provide.

A great article from National Association of Plan Advisors and Ted Godbout- thanks for sharing John Sullivan

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