ERISA states that every plan document must identify a “Named Fiduciary” to be the individual or entity serving as the primary fiduciary responsible for all plan management activities (e.g., President, Plan Administrator, The Company (BOD), or another individual or entity). A plan must have appropriate fiduciaries in place so that it can continue operations and participants have a way to interact with the plan.
With most retirement plans, the fiduciary responsibility of selecting and monitoring the plan’s menu of investments is designated to a retirement plan investment committee. This committee usually includes financial officers and human resources officers of the employer. The committee meets periodically (anywhere from annually to quarterly) to consider agenda items including investment due diligence, fees and services of plan providers, status of plan goals, etc.
Target date funds (TDFs) — which rebalance investments to become more conservative as a fixed date approaches — are a convenient way for plan participants to diversify their portfolios and reduce volatility and risk as they approach retirement, making them an increasingly popular choice. However not all TDFs are created equal, and selecting and monitoring them can pose unique challenges for plan sponsors and fiduciary advisors.
Many companies are outsourcing more and more activities, mainly because outsourcing can provide cost savings and increase productivity. Outsourcing allows companies to focus more on their core businesses, rather than spending time on areas outside their expertise. For retirement plan sponsors, outsourcing services makes sense for these reasons as well as others.
Many companies are outsourcing more and more activities, mainly because outsourcing can provide cost savings and increase productivity. Outsourcing allows companies to focus more on their core businesses, rather than spending time on areas outside their expertise. For retirement plan sponsors, outsourcing services makes sense for these reasons as well as others.
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Hey Joel - What’s the appropriate number of members and positions for a retirement plan committee? ·Plannin’ in Pennsylvania
Dear Plannin’,
There is no specific guidance on the appropriate number of committee members. It’s important to have committee members who can contribute to the topics to be focused on. When there is one committee, as opposed to separate committees (for investments, plan design, employee communications, etc.) perhaps a CEO and/or CFO, an administrative executive and a participant communications representative would be appropriate committee members.
Ideally, these would be people who want to be on the committee to make a contribution to plan success and who are willing to accept fiduciary responsibilities, not the least of which is personal financial liability in event of a fiduciary breach. (Our Fiduciary Fitness Program (FFP) is designed to substantially mitigate this liability if followed appropriately.)
You can also have, as a regular or a non-voting member (guest with no intent as fiduciary), someone who can represent an employee base.
Most importantly, when setting up a committee, is to determine who the “named fiduciary” for the plan is. The named fiduciary will be identified in the plan document and this person or entity is the primary fiduciary for the plan. Note, if the named fiduciary is listed as “the Company” this is interpreted to mean the board of directors (if a C corporation or managing partners, if a partnership). The named fiduciary is expected to be the entity who has the authority to decide to have a retirement plan. The named fiduciary can delegate the majority of their fiduciary duties to co-fiduciaries (e.g., a retirement plan steering committee). Typically they would be anxious to do so as they likely would not want to be responsible for day-to-day management of the plan. The Committee Charter and ancillary paperwork (in our FFP) is designed expressly for this purpose.
The Committee Planner Extraordinaire,
Joel Shapiro
About the Author, Joel Shapiro, JD, LLM
As a former practicing ERISA attorney Joel works to ensure that plan sponsors stay fully informed on all legislative and regulatory matters. Joel earned his Bachelor of Arts from Tufts University and his Juris Doctor from Washington College of Law at the American University.
