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The Importance of a Retirement Plan Committee

Plan sponsors have a fiduciary duty to act prudently and solely in the best interests of participants. However, retirement plans have many moving parts and involve numerous decisions, so it would be very difficult for one person to manage alone. For this reason, plan sponsors often form retirement plan committees to share responsibility for plan oversight, governance, and investment decisions.

Retirement plan committees:

  • Bring different experiences, expertise, and perspectives to help the plan sponsor make more informed decisions;
  • Demonstrate that a prudent process was followed when making investment choices; and
  • Document the rationale for plan decisions and actions taken.

Key Responsibilities of a Retirement Plan Committee

Similar to a plan sponsor, a retirement plan committee is responsible for the prudent management of the retirement plan. Since committee members are plan fiduciaries, their primary focus is to make decisions that are in the best interest of plan participants and their beneficiaries. They should strive to enhance the retirement experience for employees by offering a well-structured, diversified, and competitive plan.

Key responsibilities of a retirement plan committee include:

Establishing an Effective Retirement Plan Committee

Because creating a retirement plan committee is a fiduciary act, the plan sponsor should carefully think through its structure, membership, and operation. The following are several best practices that will help establish a committee with the right makeup:

  • Create a charter – The charter defines the roles and responsibilities of the fiduciaries and service providers and establishes policies and procedures to ensure effective management and administration of the plan. A charter may also include the criteria for selecting committee members, the process for hiring and monitoring service providers, and the frequency of meetings, as well as who will document the meeting minutes.
  • Select committee members – It is ideal to have a diverse group of individuals, from all levels and backgrounds, on the committee (e.g., chief financial officer, director of compensation, senior executives, human resources, and operations). Consideration should also be given to the number of committee members – an odd number is best for voting purposes.
  • Provide fiduciary training – Most retirement plan committee members know they are plan fiduciaries, but many do not know what that really means and that they can be held personally liable. Initial and ongoing fiduciary training will help ensure committee members understand the magnitude of their responsibilities and the importance of following a documented process to make decisions that are in the best interest of plan participants.
  • Conduct committee meetings – Regular meetings demonstrate that the committee is following a prudent process to make plan decisions. Agendas are useful for keeping meetings on track and to ensure important topics are addressed. Detailed minutes should also be taken and kept on file for potential inquiries from regulators, external auditors, etc.
  • Monitor the retirement plan committee – At least annually, the plan sponsor should review the committee charter and the operation of the committee itself. The goal is to ensure the provisions of the charter are being followed and that the committee members are fulfilling their responsibilities.

A retirement plan committee’s responsibilities encompass a wide range of activities aimed at safeguarding the financial interests of plan participants. With the proper structure and right members, a committee can be an integral part of a successful retirement plan program.

Please contact us if you have questions about the information outlined above; our seasoned and experienced employee benefit plan professionals are here to help. You can also learn more about our Employee Benefit Plan Audit services by visiting our website.

About the Author

Steph Kramer

Steph joined McKonly & Asbury in 2016 and is currently a Manager in the firm’s Audit & Assurance Segment. Steph audits a broad spectrum of employee benefit plans, including 401(k), 403(b), retirement, profit sharing, health and… Read more

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