Build a Plan Committee in Six Steps

Plan committee members are also the primary named fiduciary for a typical retirement plan, according to a recent white paper from Chicago-based retirement plan consulting firm PlanPILOT, so there is even more at stake in committee assembly decisions. The wrong processes and decisionmaking can lead to costly litigation.

“How to Build and Run a Retirement Plan Committee” describes the process in six steps.

First, those involved in developing the committee must determine its size. Small organizations with a relatively simple plan may need only a couple of group members, while larger organizations with multiple plan service providers and more complicated plans may require larger groups.

The principal driver is often how many committee members are available, based on an organization’s time and resources. Five seems to be the ideal number, according to the research, a number that optimizes both productivity and diversity of opinion and expertise.

Organizers should strive for diversity. PlanPILOT advises organizers to consider varied categories, such as social diversity (members of different race, age, and gender) or skill set diversity (different professional backgrounds). Another category could be value diversity, where members have different opinions about the goal and purpose of the plan.

The next step is selecting a committee leader--best accomplished by choosing someone who is process-oriented and can maintain the committee’s cohesion through challenging debates. After that, establishing effective meeting rules, such as setting time limits and ensuring meetings have a specific topic, becomes critical.

All committees should designate one person to take meeting minutes covering who attended the meeting and any decisions reached. Minutes must show the rationale for decisions made and demonstrate a prudent process was followed.

Careful consideration must be given to documenting investment policy statements, quarterly investment reports, manager search reports, committee charters, committee acceptance/resignation forms and conflict of interest disclosure statements.

Finally, effective plan committees know when to seek outside help in dealing with the above issues.

A complete copy of the white paper is available here.