Morningstar Investment Management and PAi Announce First ESG Pooled Employer Plan

Morningstar Investment Management and PAi Announce First ESG Pooled Employer Plan

Morningstar Investment Management LLC, a subsidiary of Morningstar, Inc., and Plan Administrators, Inc. (PAi), a retirement plan administrator and recordkeeper, announced plans to offer the industry’s first Pooled Employer Plan (PEP) intentionally designed to limit exposure to material environmental, social, and governance (ESG) risks. The Morningstar ESG Pooled Employer Plan is expected to launch in early 2022, pending final guidance from the U.S. Department of Labor on the use of ESG factors to select investments for retirement plans.

PEPs allow employers of any size or industry to band together to participate in a single retirement plan. This helps relieve administrative and compliance burdens and potentially reduces fees, making it easier for small- to mid-sized companies to offer a 401(k) plan so their employees can save for retirement. The PEP from Morningstar Investment Management and PAi will feature funds that meet Morningstar Investment Management’s rigorous investment selection criteria and pursue investment strategies designed to limit ESG risk. Morningstar Investment Management’s investment team uses both the Morningstar Sustainability Rating and interviews with fund managers to ascertain the ESG risk of investments under consideration. The objective of the Morningstar ESG PEP will be to create as close to a complete ESG lineup as possible, though certain asset classes (such as TIPs or money market funds) where no ESG investment option exists in the market may be represented to help participants diversify their portfolios.


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Morningstar Investment Management and PAi Announce First ESG Pooled Employer Plan 1

“Sustainability is the new face of long-term investing, and we believe every company should be considering ESG risk when designing a retirement plan for their employees,” said Brock Johnson, president of Global Retirement and Workplace Solutions at Morningstar Investment Management. “The Morningstar ESG Pooled Employer Plan is designed to empower forward-thinking companies with an opportunity—perhaps for the first time—to offer their workers a retirement plan truly built for the modern era.”

PAi Trust Co. will oversee the plan as the pooled plan provider, and the PEP will be offered on PAi’s CoPilot recordkeeping platform that focuses on outcomes by engaging participants using event-based alert messages. In addition to those timely alerts and nudges, CoPilot provides a Years of Retirement tool that shows participants how many years their savings will last, not just how many dollars they’ve saved.

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Amy Hermann, director of sales and marketing at PAi explained, “PAi believes every employee should have access to an employer-sponsored retirement plan. Adding PEPs to their retirement plan options makes it that much easier. Plus, a PEP takes the day-to-day administration off employers’ plates so they can concentrate on running their business. By teaming up with Morningstar Investment Management on the Morningstar ESG PEP, PAi can fulfill a growing need in the market for ESG and we believe that Morningstar Investment Management is well-positioned to help us create that service.”

Morningstar Investment Management will select and manage the investment lineup for the Morningstar ESG PEP, using its expertise from building and overseeing 20,4151 lineups for its fiduciary services program and drawing from Morningstar’s independent research and ratings. Morningstar Investment Management will also create a custom ESG target-date portfolio for the PEP, designed as an option for the Qualified Default Investment Alternative.

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