Retirement Plan Committees: Crucial Failsafe

Sometimes the most mundane details can be overlooked—which, for a plan, entails risk. In fulfilling the myriad responsibilities attendant to offering and running a plan, a retirement plan committee can be a great help. 

Navigating increasingly complicated benefits administration—and against a backdrop of continually evolving ERISA duties—can be better accomplished with the assistance of a retirement plan committee, Multnomah Group reminds in “Cultivating Retirement Success: Streamlined Best Practices for Committees.”

The Committee Itself 

“Choosing the right people for a retirement plan committee is very important because they have these fiduciary responsibilities, which are significant. Really, they are accountable for ensuring that the plan operates in the best interests of participants,” says American Retirement Association General Counsel Allison Wielobob.

“In thinking of who should be on the committee, I think about the roles as informing the considerations of who should be involved,” Wielobob continues, adding, “The essential roles center on financial expertise—someone with financial acumen and an understanding of the company’s financial condition, investment expertise, administrative expertise, for example, someone who manages plan administration and understands participant concerns, and legal expertise.” 

But there is more to keep in mind in forming a retirement plan committee, Wielobob notes. “Other considerations include understanding the responsibilities and ability to dedicate time for meetings and decision-making, a willingness to learn (because there is always something to learn in this realm!), and independence. Non-management employees or external trustees should be considered because they may offer objective decision-making,” she suggests. 

The committee’s size and structure should be commensurate with that of the plan, argues Multnomah Group—and while its members don’t have to be experts, they should be qualified to serve on the committee in some way and be willing to work toward the common goal of complying with ERISA. They suggest that they hail from at least the human resources, finance, business affairs, and legal departments. 

Fiduciary Duty

Since the committee helps with discharging fiduciary duties, its members share in fiduciary liability.

“In the most general terms, the responsibility of retirement plan committees is to ensure fiduciary compliance. Among other things, this includes monitoring review provider costs and performance, and if needed, replacing providers,” says Wielobob.

The board should explain that fiduciary duty to nominees to serve on it, Multnomah says—and have them accept and acknowledge that duty in writing.

Further, they suggest that the Board may want to indemnify committee members from personal liability. 

Charter 

Multnomah suggests that a board may find it useful to set a charter for the committee that (1) establishes and articulates its purpose, structure, objectives, responsibilities, governance, and frequency of meetings; (2) describes the board’s authority to delegate fiduciary duties to the committee and what those duties are; and (3) authorizes the committee to delegate its responsibilities. 

Meetings 

Quarterly meetings are the most common for retirement planning committees, says Multnomah, but may be more or less frequent than that based on the needs of the plan. The charter can spell out the frequency, they add, but should also give the committee the ability to hold ad hoc meetings when necessary in order to meet unforeseen circumstances that may arise. 

Documentation

The paper suggests that part of the committee’s due diligence is to maintain certain documentation. 

Meeting minutes. Meetings should be documented, Multnomah advises, and provide information regarding attendance, matters discussed, decisions and how they will be implemented. This is key, they argue, because it is possible that regulatory authorities, litigants, or courts may request minutes and it demonstrates a procedural diligence that can protect the fiduciaries, plan, and plan sponsor.  

Investment strategy. The paper also suggests that the committee may find it prudent to document the plan’s overall investment strategy as a means to fulfill its fiduciary duties and protect itself, the plan, and the plan sponsor in the event of accusations of imprudence.

Such a written investment policy statement could:

• define the process by which investment options are chosen, monitored, and terminated;
• describe fund selection and deselection criteria and metrics; and
• exemplify the plan’s commitment to those guidelines. 

Further, an annual review of the investment policy statement can help ensure it is appropriate to the plan’s objectives and the needs of participants and beneficiaries. 

It’s Lonely at the Top 

Ultimate fiduciary responsibility attendant to plan sponsorship ordinarily belongs to a Board of Trustees, Directors, or Regents. And even when they form a committee to help oversee and run a retirement plan, they are not relieved of that the-buck-stops-here responsibility. 

Since they retain that ultimate responsibility, the paper points out the importance of those officials being careful to nominate and select committee members whom they can trust to grasp and respect fiduciary duties under ERISA. And establishing a process for those selections and a means by which the committee will provide a report regarding their activities can be additional tools by which those with ultimate fiduciary duty can fulfill it.