PANC 2018: Plan Committee Excellence

The second day of the 2018 PLANADVISER National Conference in Orlando included a broad discussion about the challenges of building great retirement plan committees.

Bruce Lanser, senior retirement plan consultant with UBS Retirement Plan Consulting Group, moderated the panel, which featured Stephen Rubino, senior vice president of institutional services at Financial Engines; Tim Irvin, consultant with Cammack Retirement Group; and Robert J. Rafter, president of RJR Consulting.

While all agreed the retirement plan industry has evolved substantially in the last decade, they also agreed that to this day, one of the most common reasons plan sponsors turn to advisers is to get assistance with governance, including items such as putting in processes that help avoid litigation and running an efficient committee meeting. Advisers do this by working hand in hand with retirement plan committees.

According to Rafter, there is a “terrific opportunity out there” for advisers to work with retirement plan committees because, simply put, many employers simply do not have the internal expertise to ensure the retirement plan is run in an efficient and compliant manner.

“Doing regular training and working with plan committees will remain a terrific opportunity as the legislative and regulatory picture shifts, and it is a win-win for the adviser and client,” Rafter said. “In my opinion, working with plan committees to make sure they are fulfilling their responsibilities makes your 3(21) fiduciary and 3(38) fiduciary investment services that much more powerful.”

Irvin agreed with that take and added that “getting the right people in the room who can consistently make the right decisions for the plan is a challenge, but it is so crucial.”

“I don’t know that there is a right number of individuals for the committee,” he noted. “Two people is probably not enough. It’s really more about getting good representation of the demographics in the plan, and expertise across finance, staff roles and benefits. I think a group in the mid-single digit range is sensible. And having an odd number of people seems to be helpful to prevent gridlock.”

Rubino and Rafter suggested that, apart from regular ongoing committee training, when there is a change in the committee makeup, this is a great time to level-set the existing members and to educate the new members on the fundamentals.

“A focused training session will make the new people much more confident and, importantly, more competent,” Rafter said. “To a large extent it is the adviser’s role to orchestrate all of this. Through regular and ongoing committee training, you can do a lot to put peoples’ minds at rest while improving the plan outlook.”

The panel agreed that advisers can use litigation examples to wake up plan sponsors, but the real benefit of talking about litigation is to help define the lessons learned and the key processes and procedures that will help defend against a lawsuit in the future.

“You can talk about prudence as a concept but it’s more powerful to point to cases where prudence was an issue,” Rafter suggested.

When it comes to plan committee turnover, the panel agreed that ideally there won’t be a lot, because of the need to view the plan over the long term and with lasting consistency. To this end, the majority of committees the panel works with do not spell out a committee member term limit.

“How do you get people involved and excited in committee meetings? It’s easy, with free food,” Irvin only half-joked. “Simply put, as the adviser, you need to work hard to make the committee meetings engaging and informative. Those of us in the industry may love this topic, but the average person doesn’t find it exciting. One practical tip is to play on peoples’ strengths. Let people know their particular skills are are needed and that they are serving an important and noble purpose.”

The panel shared the final point that documentation of deliberation is so crucial when it comes to proving that a plan committee is acting prudently—and this documentation should be kept up to date and readily available in case the plan receives a Department of Labor (DOL) audit notice.

“The DOL will expect that many documents be sent in advance of the audit,” Rafter explained. “They want plan and trust documents, IRS determination letters, investment policy statements, the last three years of Forms 5500, the most recent investment valuations, minutes from committee meeting and service provider contracts. Having these documents ready to go immediately is so key. It makes the plan look way better in the eyes of the DOL. If you have to ask for extensions this immediately raises red flags for DOL.”