Establish a retirement plan committee and a governing charter

A formally organized and appointed benefits committee with an appropriate delegation of duties can serve as an effective tool to monitor your plan’s operations and minimize the potential fiduciary liability. The Retirement Plan Committee (“Committee”) assumes responsibility for running the plan and for selecting the available investment alternatives. Under ERISA, the plan administrator (i.e., the person or persons ultimately responsible for the operation of the plan) has a duty to monitor the fiduciary actions of the Committee and anyone else who is designated to act on behalf of the plan. Remember, however, that fiduciaries remain liable for any breaches by their co-fiduciaries that they know, or should know, about.

The Committee has various fiduciary responsibilities to the plan and its participants, including:

• A duty of loyalty
• A duty of prudence
• A duty to administer the Plan in conformity with its terms and the requirements of applicable law
• A duty to monitor investment choices and diversify investments
• A duty to monitor Plan service providers and the associated service fees and compensation
• A duty to communicate and disclose truthful information

Plan sponsors should strive for a diverse Committee and include representatives from varying functional areas of the organization including at least one representative from human resources/benefits, a legal representative, an executive with decision-making authority, and a rank and file employee (if a Union plan). Make sure you also generate a formal list of Committee roles and responsibilities. Often, Committee duties will encompass:

• Reviewing, interpreting and approving any plan administrative procedures
• Reviewing revisions to plan administration suggested by the HR or Benefits department
• Engaging third-parties (e.g., attorneys, agents, advisors, enrolled actuaries, etc.) as required to carry out provisions of the plan and providing oversight of such third-parties
• Periodically reviewing service providers and any relevant service agreements
• Consenting to or rejecting plan amendments
• Periodically reviewing plan expenses to determine if they are necessary and reasonable
• Monitoring plan investments or overseeing the Investment Committee (see Best Practice #4)
• Evaluating participant claims on appeal

Typically, a Committee will be governed by a charter that specifically sets forth their duties and responsibilities.