As retirement plan consultants we strongly encourage our clients to formally establish a Retirement Plan Committee.
The establishment of a Committee may be formalized by adopting a Retirement Plan Committee Charter. This Committee Charter helps to protectthe named fiduciary, typically the Board of Directors, by delegating certain identified fiduciary responsibilities to the Committee. It protects the Committee members by defining the specific duties for which they areresponsible. Furthermore, it protects the participants as it provides for orderly and prudent governance of the plan designed for the exclusive best interests of the participants and their beneficiaries, as required by ERISA Section 404(a).
Discuss this topic with your plan consultant during your next meeting. He/she can assist the process of adopting a Committee Charter by providing our sample Committee Charter document and helping select the appropriate provisions. Consider the following discussion points:
- Determine the purpose of the Committee (investment related, administrative issues, or both).
- Determine how Committee members are selected (who should/should not be members).
- Is there an ideal number of Committee members?
- What topics should the Committee cover?
The recent volatility in the stock market combined with our litigious society is generating concern on the part of many fiduciaries regarding their potential exposure. Taking a casual approach to plan governance, without a formalized Committee Charter, will not help insulate the company or the plan fiduciaries from participants’ complaints or lawsuits. Please call your plan consultant for more information.
401(k) Advisors (c) 2014. All rights reserved. 401k-2014-136