Retirement Plan Committees for 401(k) and 403(b) Plans
Administering a plan and managing its assets require certain duties and responsibilities of someone (or several people) who represent the employer sponsoring the plan, but who act on behalf of the employees. Many of the actions involved in operating a plan make the person or entity performing that function a fiduciary. A plan must have at least one fiduciary (a person or entity) named in the written plan, or through a process described in the plan, as having control over the plan’s operation. A plan’s fiduciaries will ordinarily include the trustee, investment advisers, all individuals exercising discretion in the administration of the plan, and all members of a plan’s administrative committee (if it has such a committee).
A retirement committee of members who have a thorough knowledge of the plan and its provisions enables the plan sponsor to demonstrate compliance with fiduciary requirements in two ways:
- It allows for documentation of all plan fiduciary decisions.
- It helps ensure there is a process in place for making decisions that are in the best interest of participants.
No matter the size of your retirement plan, it is a good idea to form a retirement plan committee.
While you may ask for volunteers or appoint committee members, it should be stressed to them the important role they will play in making decisions for the plan participants and their beneficiaries. Each committee member should have a defined role such as reviewing procedures or reviewing plan investment choices. Organization is the key to keeping the committee running smoothly. Also, it should be assumed that the records of the committee meetings will be discoverable if there is any ERISA ligitation.
A chairperson should be appointed to lead the meetings and to set the agendas. Another member should be assigned the task of taking the minutes of the meeting, which can be a brief summary of the items discussed and the decisions made during the meetings. At the beginning of each meeting, the minutes from the prior meeting should be reviewed and approved by the committee.
Decide on a meeting schedule (monthly or quarterly) and have dates, times, and meeting sites set so members can plan ahead.
Below are a few suggestions for items of discussion by committee members:
1) Review the plan provisions so everyone understands how the plan is operated. Review all documents and amendments, making sure you have signed copies in your files. You may ask your advisor to attend the meeting to answer questions. Ask your Third Party Administrator (TPA) or recordkeeper to provide a compliance calendar to help keep the plan on track.
2) Review the plan’s design and discuss if it is meeting the company’s goals. Review plan fees and their reasonableness. Discuss any new legislation that may affect your plan; if needed, consult with your TPA, ERISA attorney or other legal counsel.
3) Review the plan’s policies and procedures for: handling contributions on a timely basis, new participant enrollments, required notices, employee communications, hardship/in-service and termination distributions, and loans (if applicable). If you don’t have procedures, create them and put them in place. This will be your best defense if your plan is chosen for audit.
4) Review the compliance report and nondiscrimination testing for the previous plan year. Are there any corrections from testing that need to be made? Review any operational errors that may have occurred in the prior plan year; what steps have been taken to prevent further errors?
5) Review your prior year investment choices and decide if any changes are to be made. This would be a good time for your financial advisor to attend the meeting.
6) Review the plan’s Form 5500 filing, Summary Annual Report, fidelity bond coverage and plan audit (if applicable).
This is just a sampling of the topics the retirement committee should address. If you have any questions about forming a committee, your RMS representative will be happy to discuss where you can find the tools you may need.