Strong Plan Committees Have Documentation, Flexibility

When it comes to running strong retirement plan committees, organization, documentation and flexibility are some of the key strategies for plan sponsors and their advisers to follow, according to a June 7 panel at this year’s PLANSPONSOR National Conference in Chicago.

Committees come in all shapes and sizes depending on the size of the organization and its needs, said Julie Doran Stewart, head of fiduciary advisory services, Sentinel Group. Success comes not from following a set list of procedures, but creating the process that will best meet the plan sponsors goals and sticking to it.

“Some of the clients I work with … tend to apply a committee charter,” Doran Stewart said. “That more clearly outlines not only the roles and responsibilities, but who it is that is designated to the committee and what those commitments and timing on the committee look like.”

While that size and structure may vary, Doran Stewart recommended having an odd number of voting members in order to break ties.

She also recommended permanent seats for leaders in human resources and finance, with other parts of the business rotating through to best represent the employee base. Some clients, she noted, will hold separate meetings for these groups to do deep dives on either plan administration or investment decisions.

“You generally see that where there is particular expertise in those areas,” she said. “You may have people with financial expertise but not a lot of benefits experience—so it can be a better use of time to separate the two groups to focus on their areas … though it’s certainly best practice for the two committees to keep each other informed of what each is doing.”

In addition to internal members, she recommended bringing in the plan’s recordkeeper to answer questions or discuss new offerings. But there should always also be closed-door meetings in which the committee members can discuss the plan among themselves and be able to talk about the recordkeeper and other providers openly.

Committee Commitment

Benjamin L. Grosz, a partner at Ivins Phillips & Barker, noted that plan sponsors are obligated to have a plan fiduciary and administrator, they are not legally required to have a retirement plan committee. Rather, having one is a best practice that can guide the plan in the best direction for the organization and participants as well as help mitigate risk.

“You’d be surprised,” Grosz noted, “if you look at publicly available Form 5500s, the number of plans that do not report having any committee or any named fiduciary besides the plan sponsor itself.”

A good committee should have a detailed documentation process by the plan sponsor and their adviser or consultant, if they have one, Grosz said. This recordkeeping ensures a good fiduciary process for audits or any litigation and manages turnover on the committee.

“It’s important that people know historically what happened two years ago, or why a certain change in investment or recordkeeper was made, or whatever it may be,” he said.

Judy Bobilya-Feher, chief financial officer for Aunt Millie’s Bakeries, noted that her plan committee has administrative staff from payroll and benefits in part so they can understand the “ramifications” of the plan decisions.

“When we’re talking about implementing changes, [we want them to know] what that is going to do to the payroll processes, the system, the automation, as well as the benefits side,” she said.

This coordination, she noted, helps the firm be ready to implement any big changes ahead of time. These plan committees have also, at times, included members of information technology to address concerns about cybersecurity.

Steady Training

Bobilya-Feher also noted the importance of regular communication and fiduciary training for the committee members. The training is both to help them do their jobs, but also to have a full understanding of the obligation they are taking on.

“Oftentimes there is a sense from the senior leadership team that they want to sort of insulate [employees] against the fiduciary liability of being a named committee member and therefore a fiduciary to the plan,” she said. “Making sure that they understand that is really important and comes out through fiduciary training.”

Fiduciary training should be done formally, but also be ongoing for committee members during the regular meetings, even if just a few minutes at the end, Grosz said. It can also include training for nonvoting members, who will benefit from the knowledge, as well as one-off project areas or informational sessions on new topics.

“We’ll have a special session of, say, 20 minutes on managed accounts in terms of what the fiduciary considerations [are] and what you need to know, or maybe you’re going to [collective investment trusts] for the first time,” he said. “You can have customized and tailored training along the way.”