E. P. Sanders mistakes the semi-Pelagianism of Second Temple Judaism for Pelagianism pure and simple, and thus misunderstands Luther's critique of the Roman Catholic Church as well as his grasp of Paul. Sanders is reacting to something that doesn't exist. He has, therefore, founded a movement with an illusory raison d'etre!
Let me explain: Sanders thinks that Luther's struggle with Roman Catholicism was a struggle against Pelagianism; therefore Luther projected the straw man of Pelagianism onto Judaism. This is untrue. Luther's objection to the scholastic theology of the Roman Catholic Church was never to its "Pelagianism" because the Catholic Church was never Pelagian. It neither believed that salvation was according to works of the Law nor that the human being had to work in order to gain the gracious favor of God. Medieval Catholicism was semi-Pelagian. This is to say, the Church taught that man and God were co-operators in salvation, that grace could complement and supplement human nature. Luther and the Church of Rome agreed that salvation was by faith. The difference was that Luther said it was by faith alone. We are not participants with God. We are not co-creators with him. We are not in any kind of relationship that involves mutuality or co-dependence. Salvation is a one-way street! The sola in sola fide is crucial.
When you read most accounts of Judaism, both then (i.e., in Jesus' and Paul's time) and now, you see very quickly that Judaism operates in what Christian theologians recognize as semi-Pelagian categories. Judaism, then and now, teaches that the will of human beings is to be free, more or less. With support from the community, considerable leeway from the standpoint of a gracious God, and extensive possibilities of repentance, forgiveness, and restoration, the human being can fly right.
Judaism regards the Christian idea of original sin as overly pessimistic. Judaism shares with Christianity the hope of God's grace to sinners, as Sanders rightly pointed out. But the New Testament presents the human condition as less tractable, less subject to effort and amelioration, than Judaism generally does. Luther understood from Paul that Judaism did not go far enough in its analysis of the human problem. Luther's inherited religion had been semi-Pelagian, as Judaism was and still is.
Sanders and his colleagues in the New Perspective have missed completely the distinction between Pelagianism and semi-Pelagianism. They miss both Luther and Paul's point, and do not appear to be aware of the vital difference in anthropology that distinguishes rabbinic Judaism from Pauline Christianity.