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Offering a retirement plan Is complicated. Here's how a committee can help

Providing a retirement plan helps employers to retain employees and demonstrate that they are more than cogs in a machine. But offering a retirement plan requires compliance, oversight and therefore, a retirement plan committee.

Forming a retirement plan committee is an important first step in proper retirement plan management. The committee serves to establish a hierarchy of decisions within the organization, provides for roles in plan administration, and creates a history of documented decisions for future reference. While forming a retirement plan committee seems simple on the surface, organizations should take care to form them properly, or inadvertently create fiduciary risk to stakeholders.

The first step in creating a retirement plan committee is to formally nominate a committee through a corporate resolution by the plan sponsor’s board of directors. By creating the plan’s committee through a committee charter, a plan sponsor creates a hierarchy of decisions. The board of directors creates the committee and nominates its members but retains their fiduciary status to ensure that the plan committee executes their duties according to the charter. In this way, the board is able to delegate some of their fiduciary duties, but is never able to completely absolve themselves of it. If allowed by the committee charter, the committee may further delegate responsibilities either internally or externally by hiring and monitoring prudent professionals, such as a financial advisor.

The committee charter further helps the plan sponsor and the retirement plan committee manage risk by establishing the boundaries of the committee’s responsibilities and roles. Typically, the charter will outline the number of meetings a year a committee should have, the rules the committee will follow, and the different roles each member may have. Additionally, a complete charter will detail how and when a plan committee may delegate their fiduciary responsibility, and the criteria for other standard retirement plan administration duties, such as investment policy statement adoption, selection of professionals and other service providers, and periodic monitoring of plan administration, investments, and fees. The charter should also detail what committee members' tenure will be and should include a disclaimer automatically removing a committee member from the committee at their termination.

Who typically sits on a plan’s committee? It is best to have representation from the plan sponsor’s executive level, legal team, human resources, and those directly responsible for the plan’s day-to-day administration. Further, many committees find that adding a non-executive participant or two can be helpful in hearing participant voices in the design and administration of the retirement plan. While committee members do need some technical expertise, they absolutely should have a passion and understanding of the importance the retirement plan has to participants' long-term wellness and retirement readiness. Those who are nominated and accept their position on the retirement plan committee should formally accept their fiduciary role in writing by signing an acceptance of designation document.

At each meeting, the committee should document the discussions, findings and decisions of the committee via formal meeting minutes and save in the plan’s compliance folder. Periodically, the board of directors should review the minutes and the decisions of the plan’s committee to ensure that everything is running smoothly.

If an employer or plan sponsor is looking to offer a well-run employee retirement plan, they will need to start with a well-run retirement planning committee.

 

This article was written by Jess DeGabriele from Employee Benefit News and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].

 

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