Most committees wonder, “How frequently should we meet?” For most, quarterly meetings are sufficient. Plans with minimal activity may be satisfied with one annual meeting, so long as meetings occur with adequate frequency to handle items critical to properly manage the plan.
The purpose of retirement plan committees is to oversee investment and administrative issues. Committees should be formalized via a written document (i.e., Committee Charter) which identifies the members and establishes specific roles and responsibilities. During the course of each plan year the following items should be considered by the committee:
- Review and monitor the plan’s investments pursuant to procedures contained in the Investment Policy Statement, including selection and replacement when appropriate.
- Review plan expenses. The committee should understand and determine reasonableness of plan expenses. Recent litigation in this area has reinforced the primacy of this issue for fiduciaries. A complete fee analysis and benchmarking of providers should occur every three to five years.
- Review plan services available and those currently being provided. This is a key component going hand in hand with the expense review. Quantity and quality of services provided should certainly be among the factors considered in addressing the appropriateness of expenses. Also, the breadth and scope of services are constantly expanding and the committee should be aware of those services which may produce a value-added impact on their plan.
- Consider emerging trends, legislation, and external/internal factors which may impact the plan. Examples include the significant implications of recent litigation, Roth 401(k), asset allocation accounts (lifetime/lifecycle), automatic enrollment/escalation, etc.
- Review plan demographics. Are plan provisions understood and being administered properly? How do these provisions compare to industry norms or “best practices” guidelines? Do plan fiduciaries understand and practice their roles and responsibilities accordingly?
- Review participant demographics. Are participants in position to achieve a financially successful retirement experience? Specific items for fiduciary review are participation rates, average deferral rates, appropriate asset allocation/diversification and average account balances.
- Review participant communication/education programs. Fiduciaries are required to ensure all participants have sufficient information to make informed investment decisions. Is there evidence this is currently the case? If not, what would be appropriate courses of action?
Be sure to pursue the above issues, and any others, with the appropriate degree of procedural prudence as required of ERISA fiduciaries. Investigate the issues, take the appropriate action, and document the entire process. Contact your plan consultant for assistance with any of the areas identified above.