Should We Have a Retirement Plan Committee?

May 21st, 2018
by Jonathan Leidy

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For the vast majority of plans, the short answer is most emphatically “yes.”

If you are an employer, or employee who has decision-making authority over your company’s retirement plan, there is a strong chance that you are a 401(k) plan fiduciary.  You have a legal obligation to operate the plan solely in the interests of the plan participants (people with retirement account balances) and their beneficiaries (people who may inherit those retirement account balances).  Two additional primary responsibilities are to manage the plan for the exclusive purpose of providing benefits, and paying reasonable plan expenses.[1]

Many HR professionals, Controllers, CEOs, CFOs, and Presidents are unfamiliar with the significant amount of liability to which they are exposed with their duties as a 401(k) plan fiduciary. Establishing a retirement plan committee might be a useful component when it comes to effective oversight of your company’s retirement plan.

Questions to begin

When considering if a retirement plan committee could be beneficial for your organization, start by asking a few questions:

  • When was the last time your company’s plan was formally discussed?
  • Who makes your company’s retirement plan decisions?
  • Is it one person?
    • If one person, do they have the care, skill, and expertise to make well-informed, documented decisions?
  • Is it a group of people?
    • Is it a formal or informal group?
    • Does the group meet regularly? If so, is there a designated person who takes meeting minutes?  If not, how would the committee defend their decisions in a court of law to prove they were acting in the best interests of the participants?

Plan fiduciaries have a continual and ongoing responsibility to monitor the plan.[2]  Therefore, if there was any hesitation over these questions, maybe it’s time to speak with a professional to learn more.

Setting up a committee

If you believe a committee might be a good way to establish plan accountability, reduce liability exposure, and share the tasks associated with responsible plan management, here are some next steps to consider.

  • Create a written charter that clearly defines the roles of committee members.
  • Establish an investment policy statement (IPS). While an IPS is not required, it is highly encouraged.
  • Form selection criteria for the committee members. It is best not to include names within the charter; however, it is common to include job titles of personnel expected to be involved with plan decisions (e.g. CEO, CFO, President, HR Director).
  • Keep and Maintain documentation of all meetings. Store information in a central location or Fiduciary Vault for accessibility. Whenever there is a change in committee members, these files should be easy to locate. A friendly reminder: plan data should be kept on file for 7 years.[3]
  • Meet regularly and discuss plan information such as investments, expenses, services, and participant demographics.

Helping govern your company’s retirement plan is a big responsibility. You have the power to directly impact future retirement outcomes. It is important to take this role seriously.  By establishing a committee, your company can increase both its internal plan compliance as well as the retirement readiness of your workforce.

[1] “Health Plans & Benefits: Fiduciary Responsibly.” United States Department of Labor. 7 Feb 2018

[2] “Tibble et al v. Edison International.” Supreme Court of the United States. 18 May 2015.

[3] “29 U.S. Code § 1027 – Retention of records.” U.S. Code.